Millennium Pharmaceuticals
Re: Is MLNM a Good Buy?

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By mainelegal
November 23, 2005

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So, in fairness to the poster, given the many sided, not very well explicated (but brief to the point of pithy) opinions expressed, I only thought it fair to expand the thought on whether MLNM is a good buy. MLNM was a science company that is transitioning to a drug company.

Their expressed aspirations are to now concentrate in oncology, where they have an approved drug Velcade. It functions by inhibiting the cleansing process whereby cells eliminate errors which causes cell death. Since cancer cells have high levels of error, this will cause cancer cell death.

It is established that it works to an extent in a couple of settings, and the full flush of clinical data can be expected in a few years. Many evaluations are underway and the functioning is, at least in theory, applicable across a broad oncology disease spectrum.

The bull case is that Velcade is on the cusp of considerable use in a first line settings for two very difficult diseases - Multiple Myeloma and Mantle Cell Myeloma. The mechanism of action is somewhat generic - many of the explosive growth cancer cells (which are a small percentage of all cancer cells) have multiple errors making them susceptible to inhibition.

The mechanism makes Velcade a likely positive ingredient in treatment cocktails as well, as it adds a possible additional potency and activity facet to other partially successful treatments.

The bull case for the stock imagines a good future for Integrilin, a royalty cardiac drug for MLNM. As well, another particle in oncology is particularly promising and there are others being tested in relatively early stages. The web site has the data.

The bear case is that this story is very old and hasn't improved much over time. The company is undisciplined in its approaches, resulting in huge R & D expense over the years without much of value in result. Velcade faces significant competition in the near future in its primary approved uses and is very expensive. It is the most effective treatment but its overall efficacy remains limited.

The future is conjectural for a company with Phase I & II studies underway for most of its other possible molecules, and the size of other competitors and the scope of their research capabilities means that the head start in inhibition will not last.

The shares traded much higher in former times, have dipped into the 8's (maybe even the 7's) in recent history and are currently creeping towards 11 on light volume. There is a new CEO who is cutting costs and narrowing the focus of the company's pharmaceutical ambitions.

I like the bull story. Soon, Celgene will probably get approval for a drug -Revlimid- which the market will accept as direct competition for Velcade, pressuring the shares. Some think the side effects of that drug will be too much for its adoption as the first line. My view is that a combo therapy at lower doses of each is the most likely outcome.

If you were looking for an event to time to for a purchase, and expect, as many do, that Revlimid will be approved on some basis, that might be the event. On the other hand, maybe not.

Velcade is a real cure for cancer for some people. Research will some day show why it works for some and not others. It will then be better differentiated and another molecule of great promise may become the gold standard for a somewhat generalized treatment, or Velcade might be adjusted to be more effective, more widely applicable and less toxic. MLNM at one point liked to claim that they were creating a future of personally tailored medicines for all. That was before the business team replaced the science team at the top.

They have cash and little debt, partnerships with Schering Plough and J & J.

I'm guessing I didn't do justice to the bull case. I'm certain I've not well detailed the bear case. But in answer to your question, is it a good buy, I repeat - maybe.

For me, I've been long for quite a while and adding when I can. The company sets what seem like low thresholds for itself from quarter to quarter and meets them.

Best regards.

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