Investor's Business Daily, September 21st, 2007
Pharmion Corp.
Boulder, Colo.
pharmion.com
When an unprofitable biotech's shares rise sharply, it usually means a developmental drug has done well in clinical trials.
Pharmion's PHRM shares recently soared 75% over two days for a different reason. Its key drug, already on the market, proved to be more effective than anyone anticipated.
The drug, Vidaza, was approved in 2004. It treats myelodysplastic syndromes, blood diseases that can be precursors to leukemia. Results of a real-life trial showed patients on Vidaza had a median survival rate of 24.4 months, compared with 15 months for those on the current standard of supportive care.
That's a huge improvement. The data prompted Matthew Osborne, an analyst with Lazard Capital Markets, to raise his price target 50%, from 34 to 51. The stock currently trades near 44.
"The results surpassed the outcome Pharmion had expected," Osborne said.
The evidence makes European approval certain for Vidaza, he says.
Vidaza's success also focused attention on Pharmion's application for approval of another drug in Europe: Thalidomide Pharmion. Thalidomide, notorious for causing birth defects in the 1960s, is used to treat multiple myeloma, a bone marrow cancer.
Pharmion expects EU approval for Thalidomide by the end of 2007. It also has an application before the EU for Satraplatin, a drug to treat a type of prostate cancer.
THE FINANCIALS
Pharmion logged a profit in 2005 but lost $2.84 a share last year. Analysts see losses narrowing to $1.12 for 2007.
Analysts predict a profit of 31 cents a share in 2008 and $1.51 in 2009.
THE COMPANY
Pharmion focuses on cancer and hematology. Founded in 1999, the company went public in 2003.
Its business model differs from most biotechs. Instead of developing new drugs from scratch, Pharmion in-licenses biotech prospects.
It acquires marketing rights for countries where a drug's originator lacks regulatory approval. Pharmion does the work to get those approvals.
The company licensed Thalidomide from Celgene CELG with global marketing rights except in the U.S., Japan and China. It also got world rights to Vidaza from Pfizer's PFE Pharmacia & Upjohn unit.
Also unlike most biotechs, Pharmion fields its own marketing force, both in the U.S. and foreign countries. It's an unusual approach, says Chief Executive Patrick Mahaffy.
"We benefit from the data we get selling our own products," he said. "That gives us a competitive advantage over companies that have only U.S. infrastructure."
Rivals include MGI Pharma's MOGN Dacogen, which competes against Vidaza, and Celgene's Revlimid, which will compete against Thalidomide Pharmion in Europe. Revlimid is another variant of Thalidomide.
LOOKING AHEAD
Mahaffy predicts the Vidaza data will "create a buzz" at the American Society of Hematology annual meeting in Atlanta in December.
Survival data for Dacogen is due in mid-2008. Analyst Osborne surveyed doctors and found 93% would prescribe Vidaza if it came out ahead of standard treatments.
