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05/02/2003 12:00 am EST


John McCamant

Editor, Medical Technology Stock Letter

A New Millennium

"Multiple myeloma (MM) is a cancer that occurs in the blood stream," says Jim McCamant, editor of The Medical Technology Stock Letter. "It is the second most prevalent blood cancer after non-Hodgkin's lymphoma. More than 40,000 Americans currently have MM and more than 14,000 new cases of MM are diagnosed each year in the US. Without treatment the current median survival is six months. The current standard of care for newly diagnosed MM patients is first-line chemotherapy and Thalidomide is the first new therapy for the treatment of MM in the last 30 years.

"A new treatment, Velcade, is being developed by Millennium Pharmaceuticals (MLNM NASDAQ). To date, studies show that Velcade has a unique mechanism of action, with broad activity against a variety of tumor types. Millennium surprised the investment community when it announced late last year that they would file for FDA approval based on the Phase II trial data. The basis will be the two Phase II trials presented at the American Society of Hematology late last year. The study was a 202-patient study in relapsed/refractory MM patients. In June of last year, MLNM started a 600-patient Phase III trial, as well as trials testing Velcade in a variety of cancers which could significantly expand the market opportunity for the drug candidate."

"Millennium amazed the industry in the late 1990s with a stream of big money deals with pharmaceutical companies. At that time MLNM was still a young company without a single compound in late-stage clinical trials. Customers were lining up at MLNM’s door to access their impressive drug discovery engine utilizing genomics technology. Over the years, MLNM has seemed to stay one step ahead of its peers, first by bagging lucrative lead identification deals, then by taking key steps toward becoming a fully integrated biopharmaceutical company. We believe they have now made that transition. MLNM has one marketed product and a second awaiting approval. With a market capitalization of $3 billion, a net cash position over $1 billion, and both research and product revenue coming in, MLNM is an excellent value right now. Eli Lilly and Aventis led the way, while American Home Products, Roche, Genentech, Bayer, Bristol-Myers Squibb, and Abbott Labs are other key partners.

"As for Velcade, the company should hear back from the FDA before the end of July. We expect MLNM will benefit from being one of the first priority applications to be handled under the new regime at the FDA. This could get Velcade on the market this year. If it is approved, it will be the first new drug for multiple myeloma in 30 years. We therefore believe that Velcade approval and launch could both happen this year. Analysts have projected revenue of $150 million in 2004, jumping to $300 million in 2005. However, these figures could change dramatically if Velcade is found to be effective in other types of tumors. We believe that MLNM has reached a point in their development in which they can maintain a steady stream of late-stage drug candidates. The company has predicted breakeven profitability in 2006, based on optimistic Velcade sales. Given the value of MLNM’s technology, product sales, and drug candidates, we believe it is significantly undervalued at current levels. We are comfortable setting a buy limit of $14 and an 18–24 month target of $25."

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