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Pharmion

(PHRM)

shares got a huge boost Thursday after the Food and Drug Administration approved Vidaza, the company's drug to treat myelodysplastic syndrome, or MDS, a cancer-like disease of the blood.

One longtime Pharmion bull says the shares could go even higher, on the basis of Vidaza's prospects. But the outlook is decidedly less sanguine for

Celgene

(CELG) - Get Report

and

Supergen

(SUPG)

, two other drug companies also trying to get their own MDS drugs approved. With Vidaza approved, the regulatory bar for getting new MDS drugs approved is now higher -- not lower as some might think.

Pharmion shares closed up $12.91, or 47.8%, to $39.91 with more than 11 million shares changing hands vs. the three-month daily average of under 272,000. SuperGen shares closed up 31 cents, or 4.3%, to $7.49, while Celgene, which was initially trading up in sympathy with Pharmion, fell 45 cents, or 0.8%, to $53.51.

Nate Sadeghi, director of biotech research at Avalon Research, slapped a buy rating on Pharmion in January when the stock was trading around $17, based on his belief that Vidaza would get approved. The FDA approval of Vidaza came early; a decision wasn't expected by most until late June. Regulators also granted Vidaza a full approval for all five of the subtypes of MDS -- again, better than expected.

Obviously, Sadeghi has done very well for his clients -- much better than, say, J.P. Morgan analyst Cory Davis, who upgraded Pharmion to buy from neutral on Wednesday, meaning he missed the bulk of the stock's run-up.

By Sadeghi's reckoning, Pharmion could go higher. He sees fair value for the stock at a bit more than $59 per share. (Avalon does no investment banking.)

Sadeghi says there are about 40,000 patients in the U.S. with MDS. Pharmion, he conservatively estimates, will reach about 22.5% of those patients by 2006, the second year of Vidaza sales. At a per-treatment cost of $32,000, that works out to $288 million in Vidaza sales in 2006.

"Apply a six times

price-to-sales multiple and a 25% discount, and we value Pharmion's domestic Vidaza franchise at $1.1 billion, or $43.49 per share," Sadeghi says.

Sadeghi gets to his $59 target price by adding the new Vidaza estimates to Pharmion's existing drug business -- selling thalidomide as a cancer treatment in Europe -- plus its cash on hand.

Moving onto Pharmion's competition: The early buzz this morning was that the Vidaza approval was a good thing for Celgene and SuperGen. The logic -- incorrect, in my opinion -- was that the FDA appears to have a low bar set for MDS drugs, which means that Celgene and SuperGen could have easier times getting FDA approval for their respective MDS drugs, Revlimid and Dacogen.

I think the exact opposite is true. MDS was, until yesterday, a serious and fatal disease without an FDA-approved treatment. That's not the case anymore, so the sense of urgency on the FDA's behalf is probably gone. This makes it tougher for Celgene and SuperGen, not easier.

Moreover, the clinical data reported for both Celgene's Revlimid and SuperGen's Dacogen don't show efficacy across all the subtypes of MDS. That potentially means that even if these drugs are filed with the FDA and get approved, they could be construed as niche products and not used as widely as Vidaza. To be fair, all the Revlimid data in MDS hasn't been made public, so the breadth of its efficacy may grow; the drug is also a pill, which is easier to take than Vidaza, which is given as an injection.

But all the

data for SuperGen's Dacogen has been published; it's not so great and only seems to help a subset of MDS patients. Dacogen is also an intravenous drug, the most inconvenient form of administration of the three drugs. Lastly, let's not forget that SuperGen's management team has proven itself to be fairly incompetent, which doesn't exactly instill a lot of confidence in their ability to get Dacogen approved.

So while investors wait to see if and when SuperGen and Celgene can file their respective MDS drugs with the FDA, and wait to see how long the agency will take to review them, and wait to see if they will ever get approved, Pharmion will be out in the market selling Vidaza. Any way you slice it, the news is not good for the competition.

Please note that due to factors including low market capitalization and/or insufficient public float, we consider SuperGen to be a small-cap stock. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.

Adam Feuerstein writes regularly for RealMoney.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. He invites you to send your feedback to

adam.feuerstein@thestreet.com.