MGI Pharma: Cancer Care

07/29/2005 12:00 am EST


Scott Gottlieb

Editor, Forbes/Gottlieb Medical Technology Investor

With a few months of publishing now complete, Dr. Scott Gottlieb has proven that my initial positive view of the Forbes/Gottlieb Medical Technology newsletter was warranted. Indeed, each issue enhances my opinion that this service should be a "must read" for biotech investors.   

"I have some consistent criteria when it comes to finding the most promising biotech stocks. I prefer those that are making drugs that target specialty therapeutic areas, where the reimbursement, regulatory, and legal risks of doing drug development work are lowest. I like companies that are carving out a favorable reimbursement position and have some pricing power for key products. I like companies that focus on only a few disease areas. And finally, the best biotechs are those with drugs that may prove to have more widespread therapeutic applications than anticipated.

"MGI Pharma (MOGN NASDAQ) combines all of these favorable attributes. It is a cancer-focused firm that has carved out a niche in the cancer supportive care market. The company has a number of products in late clinical development that could achieve widespread use in a range of cancers. M ost significant is Aloxi, an injection for the treatment of chemotherapy-induced nausea.  Aloxi will continue to achieve expanded penetration due to its favorable therapeutic profile and pricing. It  is also being studied in a Phase III trial for treatment of post-operative nausea and vomiting.

"Meanwhile, MGI Pharma isn’t a one trick pony. The company also has a pipeline of four new products that could each be significant opportunities, including a treatment for cervical dysplasia (a precursor to cervical cancer); a targeted immune therapeutic for cancer; and Saforis, which is for the treatment of oral mucositis, which is a side effect of chemotherapy. Saforis just completed a successful Phase III trial and MGI Pharma plans to file it with the FDA by the end of this year). And its significant pipeline product is Dacogen, for the treatment of myelodysplastic syndrome or MDS. This bone-marrow cancer causes death from low blood counts in 60% of patients and progresses to leukemia in most others.

"There is one word of caution: a generic drug is being introduced next year into the same market as Aloxi. However, I believe that a worst-case scenario is already priced into the stock. With pessimism already priced into this stockpessimism that I think is overdone and the opportunity for expanding indications for the company’s new drug, Dacogen, I believe there are multiple drivers that should push shares higher. Currently MGI Pharma has about $230 million in revenues, and a market cap of about $1.5 billion. This is the kind of biotech story I like the most: a company working in an unmet medical need with superior drugs whose ultimate value isn’t fully recognized by science, by doctors, or by Wall Street."

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