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Updated from 5:39 p.m. EST

Shares of

Millennium Pharmaceuticals


soared 21% after hours Wednesday after the biotech firm said it intends to seek regulatory approval in early 2003 for its experimental cancer drug, Velcade. The company also announced a host of upper management changes, including the resignation and replacement of its chief operating and financial officer.

The Cambridge. Mass.-based biotech firm is developing Velcade initially as a novel treatment for multiple myeloma, a cancer of the bone marrow.

The company said Wednesday that it intends to seek Food and Drug Administration approval based on results from a phase II study. Final results from this study will be

presented next week at the annual meeting of the American Society of Hematology. Interim, positive results from this study were released last May.

The company's strategy to seek approval for Velcade based on phase II data comes as a bit of a surprise, given that it recently started a larger phase III trial.

One fund manager, with no position in Millennium, says the news can be read in one of two ways: The company met with the FDA to discuss the phase II results and the agency liked what it saw and encouraged the company to file sooner rather than later.

The other scenario has the whiff of desperation, says this fund manager. Millennium, feeling under pressure due to its

moribund stock price, has decided to gamble by filing early, even though it increases the risk that the FDA turns the drug away until more data, likely from the ongoing phase III trial, are collected.

Millennium shares closed Wednesday at $10.81, but shot up 21% to $13.12 in after-hours trading, as investors clearly viewed the Velcade news as a major positive. The stock has lost more than 56% of its value since the beginning of the year.

On a conference call with analysts, Millennium executives insisted that its decision to submit an earlier-than-expected Velcade filing was coming from a position of strength. Several positive meetings with FDA officials gave the company confidence to go ahead with the filing, said CEO Mark Levin, although he declined to offer any specifics about what exactly was said in these FDA meetings. Levin also wouldn't say if the company received any written assurances from the FDA that its more aggressive regulatory strategy was being endorsed by the agency.

There wouldn't be so much head-scratching over the Velcade filingannouncement if a couple of Millennium executives weren't also leaving the company. Kevin Starr, chief operating and financial officer, is retiring to spend more time with his family, the company said. He will be replaced by Ken Bate, most recently a partner at JSB Partners, a boutique health care investment bank.

John Maraganore, Millennium's senior vice president of strategic product development, essentially one of the company's top scientists, is also leaving to become chief executive of an unnamed biotech firm.

has learned that another Millennium executive, Michael Kaufman, project leader in charge of Velcade, also left the company about six weeks ago to join a biotech startup. Kaufman's departure was confirmed by Millennium spokeswoman Kelly Lindenboom.

The departures of these executives, especially Starr and Maraganore, have some fund managers concerned that they disagreed with the decision to file Velcade early.

All the executive departures are completely unrelated to the Velcade filing decision, says Lindenboom. "Ideally, we would have preferred to hold the

Velcade news until after ASH," she says, referring to the American Society of Hematology meeting next week. "But we didn't think it would do us or our shareholders any good by releasing bad news today about the executive changes while holding onto the good news about Velcade."

Millennium didn't offer any specific timeline on the Velcade filing other than to say it would happen in early 2003. The company intends to seek accelerated approval, which means the FDA would review the drug in six months. Such accelerated approvals are contingent on the completion of confirmatory studies, in this case, the Velcade phase III study.

"Millennium is taking a more risky regulatory approach, no question about it, but the potential rewards are more than worth it," says ThinkEquity Partners analyst Ed Tenthoff.

"This is really my best case scenario for Velcade because it moves up potential approval by a year," he adds. In his old model, Tenthoff was forecasting Velcade approval in late 2004; now that's pushed up to late 2003. Tenthoff rates Millennium overweight and his firm doesn't do banking for the company.