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Biotech / Medical : MGI Pharma MOGN New patents, anti cancer -- Ignore unavailable to you. Want to Upgrade?

To: tuck who wrote (1706)	10/13/2006 3:04:23 PM
From: Ward Knutson	Respond to of 1826

I think the market is now focused on strong Dacogen uptake, and looking at fairly conservative modeling which has MGI showing about $1 per share in net income for 2008. As this sinks in; with even a modest multiple, discounted back, puts shares in the mid-20's. 2008 revenue should approximate $600 million. If they start to show this is clearly attainable, the mkt will reward with significant market-cap expansion which would then allow them to tap the markets to go in-license shopping again.

To: tuck who wrote (1706)	10/13/2006 3:07:28 PM
From: tom pope	Read Replies (1) \| Respond to of 1826

Merrill seems to think it's a non-event: Saforis Approvable, Addt’l Phase III trial requested Saforis received an approvable letter to treat oral mucositis caused by chemotherapy. FDA has requested an additional Phase III study which we believe the company will not run, due to the ~$20 MM cost. However, Saforis was not included in our valuation, therefore our price target remains unchanged at $25. We believe the street is overly negative regarding the effect that generic Zofran will have on Aloxi, in addition we believe stock is undervalued. Maintain BUY. Addt’l study expensive, program termination likely We believe MGI will not conduct an additional Ph III trial due to a ~$20 MM cost compared to ~$40-45 MM in peak sales potential. We therefore believe the company will terminate the program. Saforis not included in valuation Our $25 valuation is based on cash flows from Aloxi, Dacogen, and Gliadel, and did not include Saforis. Removing Saforis from model, lowering estimates Because we believe Saforis is dead, we have removed revenues and associated costs from our model. We had assumed Saforis revenues of $21 MM in ’07 and $31 MM in ’08. Our ’06 EPS remains unchanged at $0.00, ’07 EPS declines to $0.36 from $0.45, and ’08 EPS declines to $1.15 from $1.25.