WASHINGTON, May 1 (UPI) -- Millennium says it expects Velcade sales to increase for the remainder of the year, but the consensus of analysts is the cancer drug will lose considerable market share to Celgene's Revlimid.
Charles Duncan, an analyst with JMP Securities, told United Press International Millennium will survive for the long term, but in the short term the firm is likely to face a significant challenge from Revlimid.
"We've covered them since 2000 and we've been bearish for nearly that entire time," Duncan said. "Right now, what we're concerned about is the prospects of Velcade in multiple myeloma," he added.
Revlimid could win approval for use in multiple myeloma patients in June. Duncan said he thinks Celgene's drug will steal a significant share of the market from Velcade because it has a superior side-effect profile and is more convenient because it can be administered orally vs. the injectable formulation of Velcade.
Revlimid "will become very quickly the standard of care for frontline therapy in multiple myeloma," he said. In addition, its availability will make it easier for doctors to experiment with it in other disorders, such as non-Hodgkin's lymphoma, which could further boost sales.
Millennium, however, said last week when announcing its first-quarter earnings that it expects Velcade sales to continue to increase throughout the year.
"Velcade continues to grow even with new competition," said Deborah Dunsire, Millennium's president and chief executive officer. "We expect to see sales increase through the balance of the year with growth coming from increasing the average length of therapy used by patients, as indicated in the label, and from treating more patients with Velcade."
In the first quarter Velcade sales were up 19 percent from the year-ago quarter to $53.4 million.
Millennium's total revenues were $122.4 million for the quarter, compared to $123.7 million for the first quarter in 2005.
Another concern for Millennium is its pipeline is in the very early stages of development. "I don't think their pipeline will emerge quick enough to save the day," Duncan said.
Still, the company will be able to weather the storm, he said. "I think Millennium will perhaps get creative like it has in the past" and use acquisition of a company with a promising candidate to fortify itself, he said.
"For long-term investors, it's probably a good core holding," he said. "They have a fair amount of cash, they do have a profitable drug and it is probably a healthy valuation at this point."
One strategy might be for an investor to purchase both Celgene and Millennium shares, he said. "We see a fair amount of upside potential to Revlimid," he noted.
J.P. Morgan analyst Geoffrey Meacham also was concerned about Velcade's future and reiterated his "underweight" rating of Millennium.
Meacham noted in a recent research report that Velcade sales were flat for the second consecutive quarter despite a price increase in January. This implies share loss in multiple myeloma and could be a signal of the challenge to come from Revlimid, he stated.
"We expect pressure on Velcade to increase throughout 2006 given the likely 2Q market introduction of Revlimid," he wrote. "Our conversations with oncologists suggest future Velcade use may follow Revlimid but precede Thalomid, with near term pressure highly likely in the 3rd line (multiple myeloma) setting."
Millennium has launched a phase 3 trial to determine whether Velcade could be beneficial in relapsed and refractory follicular non-Hodgkin's lymphoma (NHL) and that could be an area for Velcade to stake a claim, albeit in the distant future, Meacham said.
"Although we view it as a substantial market opportunity, we do not view follicular NHL as a near-term value driver for Velcade," he wrote.
Bank of America analyst David Witzke downgraded Millennium from "neutral" to "sell," predominantly due to the anticipated sluggish performance of Velcade.
"The impact of Revlimid is likely to be greater than is currently embedded in (Millennium) shares," Witzke wrote in a recent research report. "From our conversations with oncologists we believe that Revlimid, because of its restrictions, has been somewhat difficult to obtain for off-label use but we expect this to change immediately upon Revlimid's approval in (multiple myeloma)."
Even additional indications may not significantly help Velcade. "We see additional blood cancer indications (e.g., MCL) as relatively modest opportunities for Velcade and remain cautious on the solid tumor studies (lung)," Witzke wrote.
He also was sour on Millennium's pipeline, stating, "We see limited opportunities to fuel long term growth from the company's current pipeline."
