Millennium Pharmaceuticals
Looking Forward to 2003?

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By Caesium
January 16, 2003

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There has been a spate of drug candidates entering trials in the past 6 weeks, and a financial outlook from the Company putting back profitability until 2006, and I though it might be an opportune time to open a thread and discuss what we expect from Millennium in terms of achievemen, and what we expect from our investment in them this year.

If we start with their pipeline, 2003 promises to be a very busy year.

  • MLN01 Phase I due to report now � Xoma responsible for taking into Phase II is they do so.
  • MLN02 - Phase II expected completion in February � Expect to be discontinued
  • MLN4760 � Phase I trial results due March 2003
  • Velcade � Breast cancer Phase I trials results due May 2003
  • MLN518 � Acute Myeloid Leukemia *(Fast track status) Phase I results due May 2003
  • MLN576 � Solid Tumors Phase I trials results due June 2003
  • Velcade � Multiple Myeloma expect FDA news around June 2003
  • Velcade � Leukemia Phase II results due July 2003
  • Velcade � Hematological malignancies Phase II results due sometime in 2003
  • Velcade � Solid Tumors Ongoing phase II trial results due sometime in 2003
  • MLN591RL � Prostate Cancer Phase II results expected end 2003/early 2004
  • Integrilin � Coronary Heart Bypass graft Phase III trials results due December 2003

With this amount of trial activity coming to the end of each stage in 2003, there is little wonder that profitability is being pushed back. The sheer expense of all of these trials, (and of course we want them all to move onto the next stage), requires a massive outlay of cash from MLMN's coffers. Expect a large cash drain this year and into next year.

Their Balance sheet is going to look pretty dire, and their cash flow even worse; in all likelihood their stock price will not look pretty this time next year, if people focus only upon the numbers. There will be little in the way of increased revenues to shore up the deteriorating sets of numbers. Integrilin will continue to ramp up sales and will get a boost if the phase III trials currently underway for heart bypass obtain approval, but that will not be reflected until 2004 at least. Some revenue increase will be forthcoming from the expected approval of Velcade for Multiple Myeloma but not much more than $30m, if that, in 2003 accounts. Longer term, with a market size of only 15,000 in the US and approx. 25,000 in Europe, this alone will not become a blockbuster.

Further encouraging news on Velcade trial results will help keep the share price from freefalling, conversely any bad news on Velcade will have a predictable result on the share price.

One piece of news that only Jat4 here on this board has focused upon is the advice from MLNM that they are actively looking for partners for the marketing of their drug portfolio. They already have their (140 or so) sales force for Integrilin, and in the past we have discussed them expanding that as new drugs found their way to approval. Clearly MLNM have changed tack on this issue, at least for now with Velcade.
They have now seen the need to look for marketing partners, presumably as they realize they cannot afford their own sales force when it comes to the sheer numbers required to market potential blockbuster drugs.

Well at least we now know that MLNM, despite their vaunted leadership and expertise cannot buck basic economics, and consequently any profits gained from blockbuster drugs will be shared with their marketing partner, whoever that may be. My hope as a PFE owner as well as MLNM would be Pfizer, who boasts the best sales force in the Pharma industry. I am sure Joseph's hope is that it will be Abbot; my bridge partners husband also work for Abbot so I guess I wouldn't mind either. Or it could be Aventis, already a partner in drug development and stronger in Europe(?). Perhaps they might be a better fit. Or it might be someone completely new to MLNM, (although I doubt it).

Whoever they choose will not affect the 2003 performance in any direct way, although it will impact down the road as to how they share the revenues. If any deal is announced in 2003 look to see how favorable it is to each partner. In the past MLNM were lauded for their deal making ability, it will be interesting to see how good a deal they squeeze for themselves now they NEED a deal. Ultimately they will run out of cash if they don't.

Aside from the above, my own personal musings relate to their lack of respect to you and me as their shareholders. I am far too much committed to them to sell them for such a reason, but I am very disappointed in them nonetheless.

For me, looking through 2003 when we are sat at $8-$9 a share in January, my conclusion is there is far too much upside compared to downside at these price levels. Their pipeline looks tremendous, at least 11 trial results due in 2003, Integrilin continues increasing sales and we should have Velcade on the market by end of 2003, assuming MLNM management's confidence in receiving FDA approval is not completely misled. As always it is translating that pipeline into revenues that counts, and we will have to wait until 2004 for that to begin to happen.

All in all, another waiting year. But aside from the brush off from them, a year with more anticipation than previous years. This will not be the "break out" year, but we might see the commencement of positions from the big institutions towards the end of the year if we hear nothing but good news. Absent that and we are looking at muddling along at these levels; perhaps a little move back to the $11-$12 mark on the back of Velcade, but nothing much more IMHO.

Comments and critiques are always welcome.


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