MGI PHARMA Reports Second Quarter 2007 Financial Results

MGI PHARMA, INC. (NASDAQ:MOGN), a biopharmaceutical company focused in oncology and acute care, today reported financial results for the three months ended June 30, 2007. Total revenue for the second quarter of 2007 was $93.0 million compared to $87.2 million for the second quarter of 2006. The Company reported GAAP net income of $2.1 million, or $0.03 per diluted share, in the 2007 second quarter compared to a GAAP net loss of $19.4 million, or $0.25 per diluted share, in the 2006 second quarter. Adjusted or non-GAAP net income for the 2007 second quarter increased to $11.1 million, or $0.13 per diluted share, compared to adjusted net loss of $5.0 million, or $0.06 per diluted share, in the 2006 second quarter. See "Reconciliation of GAAP Net Income (Loss) to Adjusted Net Income (Loss)” below for information on the adjusted numbers presented in this press release. At June 30, 2007, MGI PHARMA's cash and marketable debt investments totaled $160.1 million. "We are extremely pleased with our results for the second quarter,” said Lonnie Moulder, President and Chief Executive Officer of MGI PHARMA. "Aloxi sales increased versus the prior quarter despite the transient disruption in the CINV market, and we are greatly encouraged by the strong performance of Dacogen, which continued to gain share in the market for treatment of MDS. The sNDA for Aloxi in the post-operative nausea and vomiting indication was accepted for filing by the FDA, and we remain on track to submit our NDA for Aquavan during the third quarter”. Product Sales Performance Product sales increased to $90.9 million in the second quarter of 2007 compared to $86.2 million in the second quarter of 2006, primarily as a result of the inclusion of Dacogen® (decitabine) for Injection sales following its commercial launch in mid-2006. During the second quarter of 2007, U.S. sales of Aloxi® (palonosetron hydrochloride) Injection totaled $48.3 million compared to $67.4 million in the second quarter of 2006. This year-over-year decline in Aloxi sales was primarily due to the transient disruption in the chemotherapy-induced nausea and vomiting market following the introduction of multiple generic ondansetron products at the end of the fourth quarter of 2006. Sales of Dacogen totaled $30.2 million in the second quarter, its fourth full quarter of commercial availability, and represented 31% growth versus the first quarter. Sales of Gliadel® Wafer (polifeprosan 20 with carmustine implant) were $10.5 million for the second quarter of 2007, compared to $8.4 million in the second quarter of 2006. When compared to the first quarter of 2007, this result represented an 8% sequential increase. Operating Expenses Selling, general and administrative expenses totaled $44.3 million for the second quarter compared to $35.5 million for the second quarter of 2006. Adjusted selling, general and administrative expenses were $38.8 million for the second quarter of 2007 compared to $34.0 million for the same period in 2006. This increase was primarily due to increased spending related to accelerated growth of Dacogen. Research and development expenses totaled $17.1 million for the second quarter compared to $28.2 million for the second quarter of 2006. Adjusted research and development expenses in the second quarter of 2007 were $15.5 million compared to $26.2 million in the second quarter of 2006. This decrease was primarily a result of the conclusion of certain clinical trials for Aquavan® and Dacogen. Operating income for the second quarter was $2.4 million compared to an operating loss of $10.3 million for the same period in 2006. Adjusted operating income for the second quarter increased to $11.3 million compared to an adjusted operating loss of $4.3 million for the same period in 2006. Reconciliation of U.S. GAAP to Adjusted Results: In this press release, certain non-GAAP financial measures are presented as adjusted numbers. These numbers exclude the effects of non-cash, stock-based employee compensation expense, amortization of product intangible assets, restructuring expenses, and license and milestone payments. See the attached "Reconciliation of GAAP Net Income (Loss) to Adjusted Net Income (Loss)” for a detailed explanation of the amounts excluded and included to arrive at adjusted expenses, adjusted operating income (loss), adjusted net income (loss), and adjusted per share amounts for the three-month and six-month periods ended June 30, 2007 and June 30, 2006. Adjusted or non-GAAP financial measures provide investors and management with supplemental measures of operating performance and trends that facilitate comparisons between periods before, during, and after certain items that would not otherwise be apparent on a GAAP basis. Adjusted financial measures are not, and should not be, viewed as a substitute for GAAP results. We define adjusted diluted earnings per share amounts as adjusted net income divided by the GAAP weighted average number of diluted shares outstanding. Our definition of these adjusted financial measures may differ from similarly named measures used by others. 2007 Financial Outlook Based on the best-in-class profile of Aloxi and the end of the transient disruption in the chemotherapy-induced nausea and vomiting market, the Company now expects Aloxi sales growth of twenty to twenty-five percent during the third quarter when compared to the second quarter, and continued growth thereafter. Based on strong first half results and current market trends, the Company now expects full year Dacogen sales of approximately $115 million. Gliadel revenues are expected to grow in the single digit range for the remainder of the year. The Company is maintaining its previous guidance of: Adjusted SG&A expenses of $140 to $145 million; Adjusted R&D expenses of approximately $70 million; Positive adjusted operating income The adjusted financial outlook for SG&A excludes non-cash stock-based compensation expense. The adjusted financial outlook for R&D excludes non-cash stock-based compensation expense and license and milestone payments. Adjusted operating income additionally excludes amortization of product intangible assets and restructuring costs. We have excluded these expenses because their amount and significance cannot readily be determined at this time. Conference Call & Webcast Information MGI PHARMA will broadcast its quarterly investor conference call live over the Internet today, Wednesday, July 18, 2007 at 5:00 p.m. Eastern Time. The Company’s executive management team will review second quarter 2007 financial results, discuss operations, and provide guidance on MGI PHARMA’s business outlook. All interested parties are welcome to access the webcast via the Company’s Website at www.mgipharma.com. The audio webcast will be archived on the Company’s Website through Wednesday, July 25, 2007. About MGI PHARMA MGI PHARMA, INC. is a biopharmaceutical company focused in oncology and acute care that acquires, researches, develops and commercializes proprietary products that address the unmet needs of patients. MGI PHARMA markets Aloxi® (palonosetron hydrochloride) Injection, Dacogen® (decitabine) for Injection, and Gliadel® Wafer (polifeprosan 20 with carmustine implant) in the United States. The Company directly markets its products in the U.S. and collaborates with partners to reach international markets. For more information about MGI PHARMA, please visit www.mgipharma.com. Dacogen is being co-developed by MGI PHARMA and Janssen-Cilag, a Johnson & Johnson company. Janssen-Cilag companies are responsible for regulatory and commercial activities in all territories outside North America, while MGI PHARMA retains responsibility for all activities in the United States, Canada and Mexico. This news release contains certain "forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are typically preceded by words such as "believes,” "expects,” "anticipates,” "intends,” "will,” "may,” "should,” or similar expressions. These forward-looking statements are not guarantees of MGI PHARMA’s future performance and involve a number of risks and uncertainties that may cause actual results to differ materially from the results discussed in these statements. Factors that might cause MGI PHARMA's results to differ materially from those expressed or implied by such forward-looking statements include, but are not limited to, the ability of MGI PHARMA to continue to increase sales of its marketed products, the ability of MGI PHARMA to achieve its objectives for 2007, the successful completion of clinical trials for the Company’s other product candidates, and other risks and uncertainties detailed from time to time in MGI PHARMA’s filings with the Securities and Exchange Commission including its most recently filed Form 10-K and Form 10-Q. MGI PHARMA undertakes no duty to update any of these forward-looking statements.   MGI PHARMA, INC. AND SUBSIDIARIES   CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED (In thousands, except per share data)     Three Months Ended June 30, Six Months Ended June 30,   2007     2006     2007     2006     Revenues: Sales $ 90,949 $ 86,190 $ 172,527 $ 163,715 Licensing and other   2,092     963     3,722     1,641     93,041     87,153     176,249     165,356     Costs and Expenses: Cost of sales 29,455 33,813 57,061 62,155 Selling, general and administrative 44,306 35,463 81,627 66,985 Research and development 17,132 28,192 34,134 51,157 Restructuring   (208 )   -     173     -     90,685     97,468     172,995     180,297     Operating income (loss) 2,356 (10,315 ) 3,254 (14,941 )   Interest income 1,909 1,361 3,974 2,517 Interest expense (1,874 ) (1,925 ) (3,750 ) (3,922 ) Impairment of investment - (9,880 ) - (9,880 ) Other income (expense)   60     (126 )   33     55     Income (loss) before minority interest and income tax 2,451 (20,885 ) 3,511 (26,171 )   Minority interest   -     1,450     -     3,881     Income (loss) before income tax 2,451 (19,435 ) 3,511 (22,290 )   Provision (benefit) for income tax   350     -     709     (47 )   Net income (loss) $ 2,101   $ (19,435 ) $ 2,802   $ (22,243 )   Net income (loss) per common share Basic $ 0.03 $ (0.25 ) $ 0.04 $ (0.29 ) Diluted $ 0.03 $ (0.25 ) $ 0.03 $ (0.29 )     Weighted average number of common shares outstanding Basic 79,833 78,210 79,641 78,000 Diluted 82,436 78,210 82,083 78,000       Consolidated Balance Sheet Data (unaudited) (In thousands)   As of June 30, As of Dec. 31,   2007     2006     Cash and marketable debt securities, unrestricted $ 160,137 $ 162,743 Total assets $ 498,015 $ 482,975 Total stockholders' equity (a) $ 132,144 $ 105,935   (a) In accordance with SAB 108, stockholders' equity as of December 31, 2006, has been decreased by $0.9 million from $106.8 million to $105.9 million. This reduction was due to our determination that restructuring expenses recorded during the fourth quarter of 2006 were understated by $0.9 million and that these adjustments were not material to MGI's 2006 financial statements.   MGI PHARMA, INC. AND SUBSIDIARIES   RECONCILIATION OF GAAP NET INCOME TO ADJUSTED NET INCOME - UNAUDITED (In thousands, except per share data)     Three Months Ended June 30, 2007 GAAP Adjustments (1) Adjusted   Revenues: Sales $ 90,949 $ - $ 90,949 Licensing & other   2,092     -     2,092     93,041     -     93,041     Costs and Expenses: Cost of sales 29,455 (1,979 ) (2) 27,476 Selling, general and administrative 44,306 (5,531 ) (2, 3, 4) 38,775 Research and development 17,132 (1,660 ) (3) 15,472 Restructuring   (208 )   208   (5)   -     90,685     (8,962 )   81,723     Operating Income 2,356 8,962 11,318   Interest income 1,909 - 1,909 Interest expense (1,874 ) - (1,874 ) Other expense   60     -     60       Income before income tax 2,451 8,962 11,413   Provision for income taxes   350     -     350     Net income $ 2,101   $ 8,962   $ 11,063     Net income per common share Basic $ 0.03 $ 0.14 Diluted $ 0.03 $ 0.13   Weighted average number of common shares outstanding Basic 79,833 79,833 Diluted 82,436 82,436   See Notes to Reconciliation of U.S. GAAP Net Income (Loss) to Adjusted Net Income (Loss) - Unaudited     MGI PHARMA, INC. AND SUBSIDIARIES   RECONCILIATION OF GAAP NET LOSS TO ADJUSTED NET LOSS - UNAUDITED (In thousands, except per share data)     Three Months Ended June 30, 2006 GAAP Adjustments (1) Adjusted   Revenues: Sales $ 86,190 $ - $ 86,190 Licensing & other   963     -     963     87,153     -     87,153     Costs and Expenses: Cost of sales 33,813 (2,578 ) (2) 31,235 Selling, general and administrative 35,463 (1,458 ) (2, 3, 4) 34,005 Research and development 28,192 (2,017 ) (3, 7) 26,175         97,468     (6,053 )   91,415     Operating loss (10,315 ) 6,053 (4,262 ) - Interest income 1,361 - 1,361 Interest expense (1,925 ) - (1,925 ) Impairment of investment (9,880 ) 9,880 (6) - Other income   (126 )   -     (126 )   Loss before minority interest and income tax (20,885 ) 15,933 (4,952 )   Minority interest   1,450     (1,450 ) (7)   -     Loss before income tax (19,435 ) 14,483 (4,952 )   Provision for income taxes   -     -     -     Net loss $ (19,435 ) $ 14,483   $ (4,952 )   Net loss per common share Basic $ (0.25 ) $ (0.06 ) Diluted $ (0.25 ) $ (0.06 )   Weighted average number of common shares outstanding Basic 78,210 78,210 Diluted 78,210 78,210   See Notes to Reconciliation of U.S. GAAP Net Income (Loss) to Adjusted Net Income (Loss) - Unaudited     MGI PHARMA, INC. AND SUBSIDIARIES   RECONCILIATION OF GAAP NET INCOME TO ADJUSTED NET INCOME - UNAUDITED (In thousands, except per share data)   Six Months Ended June 30, 2007 GAAP Adjustments (1) Adjusted   Revenues: Sales $ 172,527 $ - $ 172,527 Licensing & other   3,722     -     3,722     176,249     -     176,249     Costs and Expenses: Cost of sales 57,061 (3,958 ) (2) 53,103 Selling, general and administrative 81,627 (10,171 ) (2, 3, 4) 71,456 Research and development 34,134 (3,033 ) (3) 31,101 Restructuring   173     (173 ) (5)   -     172,995     (17,335 )   155,660     Income from operations 3,254 17,335 20,589   Interest income 3,974 - 3,974 Interest expense (3,750 ) - (3,750 ) Other income   33     -     33     Income before minority interest and income tax 3,511 17,335 20,846   Minority interest   -       -     -     Income before income tax 3,511 17,335 20,846   Provision for income taxes   709     -     709     Net income $ 2,802   $ 17,335   $ 20,137     Net income per common share Basic $ 0.04 $ 0.25 Diluted $ 0.03 $ 0.25   Weighted average number of common shares outstanding Basic 79,641 79,641 Diluted 82,083 82,083   See Notes to Reconciliation of U.S. GAAP Net Income (Loss) to Adjusted Net Income (Loss) - Unaudited     MGI PHARMA, INC. AND SUBSIDIARIES   RECONCILIATION OF GAAP NET LOSS TO ADJUSTED NET LOSS - UNAUDITED (In thousands, except per share data)   Six Months Ended June 30, 2006 GAAP Adjustments (1) Adjusted   Revenues: Sales $ 163,715 $ - $ 163,715 Licensing & other   1,641     -     1,641     165,356     -     165,356     Costs and Expenses: Cost of sales 62,155 (4,350 ) (2) 57,805 Selling, general and administrative 66,985 (2,945 ) (2, 3, 4) 64,040 Research and development   51,157     (4,944 ) (3, 7)   46,213     180,297     (12,239 )   168,058     Loss from operations (14,941 ) 12,239 (2,702 ) - Interest income 2,517 - 2,517 Interest expense (3,922 ) - (3,922 ) Impairment of investment (9,880 ) 9,880 (6) - Other income   55     -     55     Loss before minority interest and income tax (26,171 ) 22,119 (4,052 )   Minority interest   3,881     (3,881 ) (7)   -     Loss before income tax (22,290 ) 18,238 (4,052 )   Benefit for income taxes   (47 )   -     (47 )   Net loss $ (22,243 ) $ 18,238   $ (4,005 )   Net loss per common share Basic $ (0.29 ) $ (0.05 ) Diluted $ (0.29 ) $ (0.05 )   Weighted average number of common shares outstanding Basic 78,000 78,000 Diluted 78,000 78,000   See Notes to Reconciliation of U.S. GAAP Net Income (Loss) to Adjusted Net Income (Loss) - Unaudited     MGI PHARMA, Inc. and Subsidiaries Notes to Reconciliation of U.S. GAAP Net Income (Loss) to Adjusted Net Income (Loss) - Unaudited Three and Six Months Ended June 30, 2007 and 2006 (In thousands, except per share data)   (1) Adjusted net income (loss) and adjusted per share amounts for the three-month periods and six-month periods ended June 30, 2007 and 2006, exclude the effects of non-cash stock-based employee compensation expense, amortization of product intangible assets, license and milestone payments, the impairment of an equity investment, the consolidation of Symphony Neuro Development Company and restructuring expenses. The GAAP provision for income tax is used for both GAAP net income (loss) and adjusted net income (loss). Adjusted net income (loss) per share amounts represent adjusted net income (loss) divided by the GAAP diluted weighted average number of shares outstanding. The following tables summarize the adjustments and reconciles GAAP net income (loss) to adjusted net income (loss).                   MGI PHARMA, INC. AND SUBSIDIARIES   RECONCILIATION OF GAAP NET INCOME (LOSS) TO ADJUSTED NET INCOME (LOSS) - UNAUDITED (In thousands, except per share data)   Three Months Ended Six Months Ended June 30 June 30   2007     2006     2007   2006     GAAP net income (loss) $ 2,101 $ (19,435 ) $ 2,802 $ (22,243 )   Amortization of product intangible assets (2) 1,998 2,598 3,996 4,390   Non-cash, stock-based compensation expense (3) 7,104 1,955 12,978 3,918   License & milestone payments (4) 68 50 188 50   Restructuring expenses (5) (208 ) - 173 -   Impairment of investment (6) - 9,880 - 9,880           Adjusted net income (loss) $ 11,063   $ (4,952 ) $ 20,137 $ (4,005 )                                     MGI PHARMA, INC. AND SUBSIDIARIES   RECONCILIATION OF GAAP NET INCOME (LOSS) PER COMMON SHARE TO ADJUSTED NET INCOME (LOSS) PER COMMON SHARE - UNAUDITED (In thousands, except per share data)   Three Months Ended June 30 Six Months Ended June 30   2007     2006     2007   2006     GAAP income or (loss) per diluted share $ 0.03 $ (0.25 ) $ 0.03 $ (0.29 )   Amortization of product intangible assets (2) 0.02 0.03 0.05 0.06   Non-cash, stock-based compensation expense (3) 0.08 0.03 0.16 0.05   License & milestone payments (4) and Restructuring expenses (5)   0.00 0.00 0.01 0.00   Impairment of investment (6) - 0.13 - 0.13           Adjusted income or (loss) per diluted share $ 0.13   $ (0.06 ) $ 0.25 $ (0.05 )                     (2) To exclude amortization of product intangible assets.   (3) To exclude the effects of charges for non-cash stock-based employee compensation expense The following tables breakout the expense by operating expense category:   Three Months Ended Six Months Ended   2007     2006     2007   2006   Selling, general and administrative $ 5,444 $ 1,388 $ 9,945 $ 2,855 Research and development   1,660     567     3,033   1,063   $ 7,104   $ 1,955   $ 12,978 $ 3,918     (4) To exclude license and milestone payments.   (5) To exclude employee related expenses pursuant to the plan of organizational restructuring undertaken in Q4 2006.   (6) To exclude impairment of the equity investment in SuperGen, Inc.   (7) To exclude the impact of consolidating Symphony Neuro Development Company, a variable interest entity that was included in MGI consolidated financial statements from October 3, 2005 (date of the Guilford acquisition) through the date of effective termination in Q2 2006.