climbed Thursday on earnings that included an optimistic outlook for anti-nausea drug Aloxi.
The biopharmaceutical company reported GAAP earnings in the second quarter of $2.1 million, or 3 cents a share, compared to a loss of $19.4 million, or 25 cents a share, in the same quarter in 2006. Analysts polled by Thomson Financial expected a loss of 1 cent a share.
MGI reported adjusted earnings of $11.1 million, or 13 cents a diluted share, compared to a loss of $5 million, or 6 cents a share, on the same basis in the year prior. Revenue for the quarter was $93 million, compared to $87.2 million in the prior year, and the consensus target of $84.5 million.
Product sales increased by 5%, a rise due in part to the fact that the quarter included sales of Dacogen for injection -- a treatment launched in mid-2006 for myelodysplastic syndromes, or diseases in which the production of blood cells by the bone marrow is disrupted. Dacogen accounted for $30.2 million in sales in the second quarter, a 31% sequential increase from the first quarter.
MGI increased its Dacogen 2007 guidance to $115 million, but that could be conservative. Lazard analyst Joel Sendek noted in a report Thursday that because Dacogen sales surpassed the launch expectation, Lazard is raising its estimates beyond MGI's guidance. "We believe the market for Dacogen in MDS and other indications represents a significantly long-term opportunity for MGI," he said in the report.
Sales of MGI's Aloxi declined by 28% to $48.3 million from $67.4 million year over year. MGI attributed the decline to the introduction of generic ondansetron products (for chemotherapy-induced nausea and vomiting) with temporary reimbursement incentives in the fourth quarter of 2006.
However, the company pointed to sequential growth from the first to second quarter in sales. And most notably, a change in the Centers for Medicare and Medicaid Services reimbursement schedule. On June 15, CMS announced that the reimbursement rate (effective July 1) for generic ondansetron decreased to $16 from around $109, while the reimbursement for Aloxi increased to $166 from $160.
"While the new reimbursement schedule was expected, it corrected the six-month disruption in our market place even more dramatically than we had anticipated," said CEO Lonnie Moulder in a conference call Wednesday evening. The company now expects sales of Aloxi will increase 20% to 25% in the third quarter in comparison with the second quarter.
MGI noted that the supplemental new-drug application for Aloxi in the post-operative nausea and vomiting indication was accepted for filing by the Food and Drug Administration. Also, Moulder said the company sees the opportunity to expand the Aloxi franchise with the launch of an oral formulation, which represents about 10% of the day-of chemotherapy market.
"We expect presentation of phase III data at a scientific conference in the fall, and for a new supplemental drug application to be filed for an oral formulation later this year," said Moulder.
Analysts seem to share the optimism: "We forecast significant Aloxi sales growth with Zofran pricing arbitrage behind and significant label expansions ahead; increasing estimates," noted Lazard's Sendek.
On Thursday, Brean Murray lifted its price target for MGI to $30 from $27, and AmTech/JSA Research upgraded the company to neutral from sell.
MGI's shares gained $1.18, or 4.7%, to $26.25 Thursday.