Physicians' Financial News: February 2008

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â–º Future Looking Bright for Millennium After Record 2007

Millennium Pharmaceuticals, Inc., driven by the stellar sales and marketshare growth of injectable Velcade (bortezomib), its flagship oncology product, posted record numbers in 2007. With the continued evolution of the promising candidates that crowd a maturing drug development pipeline and the recent release of significant data supporting the prospect of expanded Velcade indications, the company is positioned to match or eclipse its unprecedented 2007 performance.

Background

Millennium, based in Cambridge, Massachusetts, was founded in 1993 and has been a publicly traded company since 1996. The Company's research, development, and commercialization activities are focused in two therapeutic areas: oncology and inflammation.

The company employs over 1,100 people and markets Velcade, a first-in-class small molecule proteasome inhibitor approved in the United States for the treatment of patients with multiple myeloma (MM) and mantle cell lymphoma (the most aggressive source of non-Hodgkin’s lymphoma [NHL]) who have received at least one prior therapy. In addition, the company receives royalties for sales of Integrilin (eptifi- batide) injection, a drug indicated for the treatment of patients with acute coronary syndrome that Millennium had formerly comarketed with Schering-Plough.

The company’s future prospects appear robust. In late December 2007, Millennium announced the submission of a supplemental new drug application (sNDA) with the FDA for Velcade in the treatment of patients with previously untreated MM. The filing is based on data from the 682 patient Phase III VISTA (Velcade as Initial Standard Therapy in MM) trial, one of the largest, international, randomized clinical trials for patients in this treatment setting. "This submission is an important step in expanding the benefits of Velcade therapy from patients with relapsed disease to those with previously untreated MM. We will request a priority review and, if granted, we could expect approval by mid-2008," said Deborah Dunshire, MD, President and CEO, Millennium.

In addition, Millennium boasts a fertile pipeline featuring 11 compounds currently in clinical development. Six of these compounds address various inflammation-related maladies (i.e., rheumatoid arthritis, asthma, atherosclerosis, Crohn’s disease and more), while the other five represent potential oncology therapies. In addition, Millennium is aggressively seeking to expand the range of indication for which Velcade is currently approved, continuing to investigate Velcade globally in Phase I, II and III clinical trials in a diverse array of hematologic and solid tumors, including front-line MM, various forms of NHL and lung cancer.

Research and Development

Millenium’s research and development philosophy is guided by a focus on disease pathways—the networks of molecular mechanisms that underlie serious diseases. “By combining this understanding with knowledge of therapeutically important differences that may exist between patients— differences either in disease pathways or in their responsiveness to particular drugs—we seek to enable ‘personalized medicine’,” commented a Millenium spokesperson. The disease pathway strategy, according to the spokesperson, has yielded several promising experimental drugs currently in development, which include molecules targeted to several key pathways, including the ubiquitin-proteasome pathway, leukocyte activation and migration, and kinase-mediated signaling.

Millennium’s oncology pipeline includes MLN0518, a potential acute myelogenous leukemia (AML) treatment in Phase II testing, and two product candidates MLN8237 and MLN8054 that are currently in Phase I trials for the treatment of advanced malignancies.

Millenium Oncology Pipeline

Drug

Cancer Type

Pre Clinical

MLN4924

Advanced malignancies

MLN2238

Various hematological and solid tumors

Phase I

MLN8237

Advanced malignancies

MLN8054

Advanced malignancies

Velcade (bortezomib)

Various types of cancers including lung, breast, prostate and ovarian

Phase II

MLN0518

Acute Myelogenous Leukemia

Velcade (bortezomib)

Non—small-cell lung cancer

Phase III

Velcade (bortezomib)

Follicular B-cell non-Hodgkin's lymphoma

Approved

Velcade (bortezomib)

Multiple myeloma and Mantle cell lymphoma

Recently, Millenium announced preliminary results from the first 49 patients enrolled in a Phase I trial of MLN8054. Data showed that oral administration of the first-generation Aurora A kinase inhibitor was well tolerated with the only dose-limiting toxicity being off-target somnolence. Analysis of actual skin biopsies showed evidence of mitotic arrest, indicative of Aurora A kinase inhibition.

The Company also continues to strengthen its position in the emerging therapeutic area of protein homeostasis. In 2007, the Company advanced two novel molecules into development in this pathway, including MLN4924 which will enter a Phase I clinical trial in early 2008. In December 2007, a second generation proteasome inhibitor, MLN2238, was advanced to the development pipeline. In preclinical models, MLN2238 showed superior efficacy relative to Velcade with potential in a broader set of hematological and solid tumors. This molecule is expected to move forward in both oral and intravenous routes of administration.

Velcade’s potential to treat other cancers besides MM and mantle cell lymphoma is being analyzed in a range of clinical research, including an ongoing Phase III trial exploring the use of Velcade in follicular B-cell NHL, and two separate in-process Phase II trials (one for non-small cell lung cancer and another exploring Velcade utilization in a variety of tumors including lung, breast, prostate and ovarian cancers). In 2008, Millenium will initiate clinical trials to evaluate the safety and efficacy of Velcade in various forms of NHL.

A key aspect of Millenium’s approach to R&D includes the formation of alliances and partnerships designed to accelerate progress toward therapeutic development. Current Millenium alliance partners in oncology include:

• Ortho Biotech Products: The Company entered into an agreement with Ortho Biotech Products, L.P., a Johnson & Johnson company, to collaborate on the commercialization and continued clinical development of Velcade for injection. Under the terms of the agreement, Millennium retains all commercialization rights to and profits from Velcade in the United States. Millennium receives royalties from Ortho Biotech on sales outside the United States. At the time the agreement was signed, the upfront and milestone payments and R&D reimbursement was valued up to $750 million to Millennium.
• Bayer AG: Cancer is one of seven disease areas included in a collaboration with Bayer that began in 1998. Under the terms of this collaboration, Millennium committed to provide Bayer with 225 novel drug targets, and will receive rights back to many of these targets over time. The most recent public statement of progress revealed that Millennium and Bayer had identified more than 140 disease- relevant drug targets, many of which moved into assay development and high-throughput screening; six projects were in lead optimization with structurally attractive compounds, and in four of these projects, disease efficacy had been shown in animals.
• Becton Dickinson: Millennium and Beckton Dickinson have been collaborating to discover and develop cancer diagnostics. The goal of the collaboration agreement is to identify markers that will ultimately form the basis for Diagnomics, proprietary new tests for various forms of cancer. Diagnomic tests are molecular diagnostics that can describe a patient's current medical condition and provide prognostic and therapeutic information.

In addition to their industry partnerships, Millennium researchers work in collaboration with many of the world's leading academic cancer-research centers.

Financial Outlook

According to recently released 2008 financial guidance, Velcade is expected to match or exceed the dramatic rate of growth (increasing roughly 20% to $265 million) it achieved in 2007. According to Millenium’s 2008 guidance statement, net sales of Velcade are expected to increase 20% to 30%, resulting in $320 to $345 million in revenues. Signifi- cant additional revenues ($175 to $185 million) are projected as a result of royalties.

Non-GAAP net income is expected to range between $80 million and $95 million, while GAAP net income is expected to fall between $10 million to $25 million. The gulf between non-GAAP and GAAP income was attributed to $34 billion in amortization charges, $30 million in stock-based compensation expenses, and restructuring charges of roughly $5 million.

Commenting on 2007 results and 2008 prospects, Dr. Dunshire stated, “The past year was the most successful in the Company's 15-year history with outstanding accomplishments across commercial, R&D and operations. Millennium is well positioned for strong growth in 2008 and beyond. The expected launch in front-line MM is the next catalyst for Velcade. Our late-stage product candidate, MLN0002, is approaching pivotal trials in inflammatory bowel diseases, representing the next revenue growth driver, and our innovative R&D organization continues to fuel the pipeline. We begin 2008 in the strongest financial position in the company's history and remain firmly committed to continued top- and bottom-line growth.”

Future Priorities

In a recent conference call with investors, Millenium identified the following priorities for 2008:

• Driving timely approval of Velcade in newly diagnosed MM and executing a successful commercial launch, based on the December 2007 sNDA filing;
• Preparing to further expand Velcade indications to encompass NHL through completion of patient enrollment in the Phase III LYM3001 trial and initiation of additional combination studies;
• Initiating a clinical trial studying subcutaneous Velcade, in order to broaden administration options for patients;
• Advancing Millenium’s pipeline of molecules in the areas of cancer and inflammatory diseases, including initiating a global Phase III program with MLN0002 in ulcerative colitis and Crohn's disease in late 2008 or early 2009;
• Continuing to evaluate appropriate in-licensing, acquisition and partnership opportunities.

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Eisai Purchases MGI Pharma

In a move likely to bolster its position in the cancer therapy marketplace, Tokyo-based Eisai Co., Ltd. has announced its acquisition of MGI Pharma, a biopharmaceutical company with an oncology and acute-care focus. The two companies announced that they have entered into a definitive merger agreement. Under the terms of the deal, valued at roughly $3.9 billion, Eisai will obtain all outstanding shares of MGI Pharma for $41 per share in an all-cash transaction.

The purchase price represents a premium of approximately 38.7% to MGI Pharma's closing share price on the last business day prior to MGI Pharma's announcement that it was exploring strategic alternatives.

The marriage of the two concerns, which has been unanimously approved by MGI Pharma’s Board of Directors, is expected to occur by means of a tender offer followed by a cash merger. Subject to customary closing conditions and regulatory approvals, the acquisition is expected to be finalized at some point during the first quarter of 2008.

To effect the transaction, Eisai has established an acquisition subsidiary, Jaguar Acquisition Corp., which is wholly owned by Eisai Corporation of North America, Woodcliff Lake, New Jersey. Subsequent to the completion of the tender offer, Jaguar Acquisition Corp. will be merged into MGI Pharma and the combined entity will then become a wholly-owned subsidiary of Eisai Corporation of North America. Eisai intends to finance the MGI Pharma acquisition through existing internal financial resources, as well as bank loan financing, and has secured commitment for the debt required to consummate the transaction.

According to an Eisai spokesperson, MGI Pharma's marketed and pipeline products in oncology and acute care, as well as its R&D and commercial capabilities, including field sales specialists, together with Eisai's existing oncology products, global infrastructure and R&D capabilities, will create a base for continued sales growth, pipeline enhancement and the opportunity for synergies. Eisai is also expecting its investment in MGI Pharma to yield further growth in the U.S. market and further strengthen its oncology business platform.

Company insiders report that the MGI Pharma acquisition is merely the latest step in a larger strategic plan that Eisai has methodically followed in an effort to bolster its oncology research and development and marketing infrastructure in the United States. Other components of Eisai’s socalled “Dramatic Leap Plan” include the October 2006 acquisition of four oncology products and specialist expertise from Ligand Pharmaceuticals, San Diego; the April 2007 acquisition of Morphotek, Inc., Exton, Pennsylvania, a biopharmaceutical company specializing in the development of protein and antibody gene evolution technology; and the current construction of a new oncology facility for manufacturing and formulation R&D at its Research Triangle Park, North Carolina site.

Commenting on the merger, Haruo Naito, President and CEO, Eisai, stated, “Eisai has enormous respect for MGI Pharma's products, pipeline and people, and we look forward to working with their highly skilled team to address the unmet medical needs of patients throughout the world. Strategically, we expect this transaction to allow Eisai to significantly strengthen its oncology business and increase the likelihood of achieving our current strategic plan targets and our future revenue and earnings growth.”

Lonnie Moulder, President and CEO, MGI Pharma, explained, “The Board of Directors of MGI Pharma, working with our legal and financial advisors, has been reviewing strategic alternatives for the company for the past several months. During that time, we have had the opportunity to share the MGI Pharma vision and business opportunity with many of the leading companies in the pharmaceutical and biotechnology industry. This transaction represents the successful conclusion of that process. Our Board of Directors and the management team are extremely pleased to announce this transaction and the opportunity to continue to bring important therapies to patients.”

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Amgen’s Denosumab Linked With Increased Bone Density in Breast Cancer Patients

A study evaluating twice-yearly dosing of denosumab’s effect on bone density across the skeleton in women with non-metastatic breast cancer who were received adjuvant aromatase inhibitor (AS) therapy has met all of its primary and secondary endpoints.

According to Phase III data from the HALT Breast Cancer 135 study, presented during the Late Breaking Session at the 30th Annual San Antonio Breast Cancer Symposium in San Antonio, Texas, denosumab increased bone density worsened by AI therapy, including in highly cortical areas of the skeleton. In addition to increasing bone mineral density (BMD) of the trabecular bone (spongy bone matrix), denosumab showed increases in cortical bone, the dense outer shell of the skeleton that is responsible for the supportive and protective function of the skeleton.

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The Phase III data show that lumbar spine BMD increased significantly at all time points with the denosumab group (N=127) as early as one month. At month 12 (primary endpoint) a 5.5% ( < 0.0001) difference from placebo (N=125) was observed. Additionally, a consistent effect of denosumab was demonstrated on the Total Hip BMD (3.7% difference from placebo) and Femoral Neck BMD (2.5% difference from placebo) at 12 months (secondary endpoints).

In addition, exploratory endpoints evaluated the effect of denosumab at the distal radius and on total body. A 3.8% change in BMD at the distal radius was observed at month 12 with denosumab compared with placebo and at 24 months that difference increased to 6.1%. A 3% increase in BMD on Total Body was shown at month 12 with denosumab compared with placebo and at 24 months BMD in the denosumab arm increased to 4.2% compared with placebo.

In the study, denosumab was generally well tolerated, with overall rates of adverse events similar to placebo. The most common adverse events were consistent with those usually associated with AI therapy (i.e., arthralgia, pain in extremity, fatigue, back pain, constipation, cough, and insomnia).

Denosumab, presently under investigation as a twice yearly subcutaneous injection, is manufactured and marketed by Amgen, Inc, Thousand Oaks, California. According to an Amgen spokesperson, denosumab is the first fully human monoclonal antibody in late stage clinical development that specifically targets RANK Ligand, the essential mediator of osteoclasts (the cells that break down bone). Denosumab inhibits all stages of osteoclast activity through a targeted mechanism that does not incorporate into bone matrix. Industry analysts speculate that, because of the large scope of the problem of breast-cancer associated bone loss and the current lack of effective, well-tolerated therapies, if denosumab clears all remaining regulatory hurdles and obtains FDA approval, Amgen may very well have a blockbuster drug on its hands.

“The results of this pivotal study provide a promising glimpse of the potential of denosumab to help manage bone disease in multiple tumor types and stages of disease in the cancer setting. These data on denosumab evaluating its effect on BMD throughout the skeleton, including cortical sites, should be encouraging to clinicians who witness the devastating effects of cancer and cancer treatment on their patients' bones,” said Roger M. Perlmutter, MD, PhD, Executive Vice President of Research and Development, Amgen.

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Genzyme’s Thyrogen Captures New Thyroid Cancer-Related Indication

Genzyme Corporation announced FDA approval for a supplemental indication for Thyrogen (thyrotropin alfa for injection). The new indication clears the way for Thyrogen to be used in conjunction with radioiodine for the most common approach to treating thyroid cancer. This includes surgical removal of the cancerous thyroid followed by remnant ablation, which destroys any remaining thyroid tissue. This can help reduce the patients' risk of disease recurrence and facilitate follow-up monitoring.

The FDA approved Thyrogen for remnant ablation based on results from a clinical study that suggest that treatment with Thyrogen is similar to withdrawal from thyroid hormone in achieving ablation, and that it could significantly reduce the side effects of thyroid hormone withdrawal by allowing patients to remain on hormone replacement therapy.

According to Mike Heslop, Senior Vice President and General Manager of Genzyme's endocrine business, "This new indication extends the significant benefits of Thyrogen to patients during their initial treatment for thyroid cancer, in addition to its current use in follow-up diagnostic procedures to detect recurrence. This is an important milestone in our ongoing effort to expand the clinical applications of Thyrogen to improve patient care."

"The development of new treatment options for thyroid cancer patients is critical, as this disease has the fastest rising incidence of all cancers among women in the United States," stated clinical investigator Paul Ladenson, MD, "The availability of Thyrogen for use in remnant ablation is a notable advance, as it permits patients to maintain a good quality of life during the course of their thyroid cancer treatment and follow-up testing."

The American Cancer Society estimates that in 2007, about 33,600 new cases of thyroid cancer were diagnosed in the United States. It is three times more common in women than in men. Approximately 90% of all thyroid cancers are well-differentiated, making those patients candidates for the remnant ablation procedure.

Thyrogen was initially approved in the United States in 1998 and Europe in 2001 for use as a diagnostic tool in the management of patients being tested for the recurrence of well-differentiated thyroid cancer. The product helps increase the sensitivity of testing while allowing patients to avoid the potentially debilitating symptoms of thyroid hormone withdrawal.