Millennium Pharmaceuticals

(MLNM)

shares sank 4% after the company reported weak sales.

The biotech stock was also hit by concerns over positive trial results from a potentially competing multiple myeloma drug by

Celgene

(CELG) - Get Report

. Celgene dropped 3% as investors digested competition prospects and quarterly earnings from both companies.

Celgene reported positive phase III special protocol assessment results of its multiple myeloma drug Revlimid. The results indicated a significant difference in time to disease progression compared with interim results previously reported. The external Independent Data Monitoring Committee reviewed data on patients receiving Revlimid plus dexamethasone chemotherapy compared with patients receiving dexamethasone alone. The company is seeking marketing approval from the U.S. Food and Drug Administration and international regulators.

Celgene has also submitted a new drug application to the FDA for Revlimid on the basis of its phase II studies in the treatment of myelodysplastic syndromes patients. Revlimid has received both orphan drug status and fast-track designation from the FDA and orphan drug status from the European Agency for the Evaluation of Medicinal Products for the treatment of MDS. In the U.S., orphan drug status is designated when a drug treats a disease so rare that there is no expectation that developing and marketing costs will be recovered by sales.

Celgene will report results from clinical trials of Revlimid for myelodysplastic syndromes and chronic lymphocytic leukemia, as well as results on trials of its other drugs, at the American Society of Clinical Oncology annual meeting in May.

Celgene says it increased research and development expenditures to $40 million from $37.7 million a year ago to support accelerated clinical development of Revlimid and to advance regulatory filings.

On Thursday, the company reported earnings per share of 26 cents for the first quarter of 2005, vs. 5 cents in year-ago quarter. Earnings for this year's first quarter included a one-time gain from the recognition of deferred tax assets previously reserved. Total revenue rose 35.6% to $112.4 million.

Celgene posted first-quarter adjusted net income of $19.1 million, or 11 cents per share, compared with $8.9 million, or 5 cents per share, in the first quarter of last year. Analysts expected earnings of 10 cents a share. Sales were $98 million, compared with analysts' expectations of $112 million.

Celgene's reported first-quarter earnings were boosted by a 2.7% sequential increase in sales of its current multiple myeloma treatment, Thalomid. The company cited repeated price increases amid declining prescription trends.

According to Smith Barney's Yaron Werber, who rates the stock a buy, "Celgene remains attractive based on potential approval on Revlimid in early 2006 in multiple myeloma." Werber does not expect the company to receive regulatory approval for MDS, and thinks the stock could be weak in the fall as a result.

"Despite the company's sluggish Thalomid franchise, bullish Steet analysts remain obsessed with Revlamid," according to Avalon Research group, but "despite Wall Street excitement about Revlimid, we believe the drug's toxicity represents both a regulatory hurdle and a commercial limitation." Avalon says it does not receive compensation from the companies it covers.

For its part Millennium reported a loss of $36.4 million, or 12 cents per share, compared with $40.6 million, or 13 cents per share, for the first quarter of 2004.

Earnings exceeded expectations of analysts surveyed by Thomson First Call. Non-GAAP net loss for the first quarter was $26.8 million, or 9 cents per share, compared with consensus estimates of a loss of 11 cents a share. While the consensus expected sales of $129.24 million, the company reported quarterly sales of $124 million, compared with $93 million a year earlier.

Net income for the first quarter or 2004 includes $40 million gain related to the sale of its equity interest in Campath, a humanized monoclonal antibody.

Sales of its Millennium's multiple myeloma treatment Velcade were up 51% to $44.8 million from $29.6 million in the first quarter of 2004, but co-promotion sales of its blood-thinner Integrilin were lower than expected because of lower reimbursement from partner Schering-Plough. Co-promotion revenue from Schering-Plough for its Integrilin injection decreased 10% from the year ago quarter, to $42.8 million.

In addition, Integrilin sales were down for the third sequential quarter, notes John Sonnier of Prudential Equity Group. Sonnier maintains his neutral-weight position. Prudential says it may earn brokerage compensation for executing trades of the stocks it covers.

"Due to weak top line, we see modest growth prospects for Integrilin and Velcade given the potential for competition from

The Medicines Company's

(MDCO) - Get Report

Angiomax and Revlimid." writes Smith Barney's Werber.

The FDA recently approved the Millennium's supplemental New Drug Application for Velcade for treatment of multiple myeloma in patients who have received at least one prior therapy. The company says Velcade is the only drug with a significant survival advantage over standard therapy in relapsed multiple myeloma. The company says the new indication increases the market of patients who could benefit from Velcade. Velcade is being co-promoted with

Johnson & Johnson

(JNJ) - Get Report

.

Earlier today, Johnson & Johnson's Ortho Biotech, which markets the drug outside the U.S., announced that the European Commission approved the use of Velcade as monotherapy for multiple myeloma patients who have received at least one prior therapy and who have already undergone or are unsuitable for bone marrow transplantation.

Both companies reiterated guidance for the year. Millennium expects a net loss less than $155 million, with net Velcade sales of $185 million to $195 million from $143.1 million last year despite a one-week inventory drawdown as it moves to using a sole distributor. Millennium says its guidance takes into consideration possible competition from Celgene's Revlimid.

Celgene expects to report total revenue of about $525 million, with Thalomid revenue in the $400 million range. The company expects diluted earnings per share for the year to be around 55 cents.

Millennium dropped 35 cents to $8.71, while Celgene lost $1.44 to $38.17.