MGI PHARMA Reports Third 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 September 30, 2007. Total revenue for the third quarter of 2007 was $112.5 million compared to $97.0 million for the third quarter of 2006. The Company reported GAAP net income of $10.9 million, or $0.13 per diluted share, in the 2007 third quarter compared to GAAP net income of $1.7 million, or $0.02 per diluted share, in the 2006 third quarter. Adjusted or non-GAAP net income for the 2007 third quarter increased to $24.8 million, or $0.30 per diluted share, compared to adjusted net income of $5.8 million, or $0.07 per diluted share, in the 2006 third quarter. See "Reconciliation of GAAP Net Income (Loss) to Adjusted Net Income” below for information on the adjusted numbers presented in this press release. At September 30, 2007, MGI PHARMA's cash and marketable debt investments totaled $166.5 million. "We are pleased with the Aloxi and Dacogen sales results, the excellent earnings performance, and the many accomplishments achieved on the regulatory front” said Lonnie Moulder, President and Chief Executive Officer of MGI PHARMA. "The acceptance of the Aloxi sNDA by the FDA for PONV, the recently approved sNDA allowing for repeated doses of Aloxi in association with multi-day chemotherapy regimens, and the submission of the Aquavan NDA during the third quarter reflect our commitment to achieving our stated goals. From a business development perspective, the addition of AKR-501 to our pipeline, an exciting product candidate for treating thrombocytopenia, provides us with a significant future growth opportunity.” Product Sales Performance Product sales increased to $110.8 million in the third quarter of 2007 compared to $95.5 million in the third quarter of 2006. During the third quarter of 2007, sales of Aloxi® (palonosetron hydrochloride) Injection totaled $66.3 million compared to $70.4 million in the third quarter of 2006. Sales of Dacogen® (decitabine) for Injection totaled $34.6 million in the third quarter compared to $11.9 million in the third quarter of 2006, its first full quarter of commercial availability. Operating Expenses Selling, general and administrative expenses totaled $38.7 million for the third quarter compared to $38.4 million for the third quarter of 2006. Adjusted selling, general and administrative expenses were $34.4 million for the third quarter of 2007 compared to $36.1 million for the same period in 2006. Research and development expenses totaled $22.8 million for the third quarter compared to $21.2 million for the third quarter of 2006. On a GAAP basis, research and development expenses contained a $5 million milestone payment to HELSINN HEALTHCARE SA related to the FDA’s acceptance of the sNDA for the post operative nausea and vomiting indication of Aloxi. Adjusted research and development expenses in the third quarter of 2007 were $16.7 million compared to $20.5 million in the third quarter of 2006. This decrease is primarily due to the conclusion of certain clinical trials and the restructure activities implemented at the end of 2006. Operating income for the third quarter was $11.2 million compared to operating income of $2.6 million for the same period in 2006. Adjusted operating income for the third quarter increased to $25.2 million compared to an adjusted operating income of $6.6 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” for a detailed explanation of the amounts excluded and included to arrive at adjusted expenses, adjusted operating income, adjusted net income, and adjusted per share amounts for the three-month and nine-month periods ended September 30, 2007 and September 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 its best-in-class profile and demand trends, the Company currently expects Aloxi sequential sales growth of approximately ten percent during the fourth quarter when compared to the third quarter. The Company now expects full year Dacogen sales of at least $115 million. The Company is maintaining its previous guidance of: Adjusted SG&A expenses of $140 to $145 million; Adjusted R&D expenses of approximately $73 million; Gliadel revenue growth in the single digit range; 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, October 17, 2007 at 5:00 p.m. Eastern Time. The Company’s executive management team will review third 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, October 24, 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 EndedSeptember 30, Nine Months EndedSeptember 30, 2007 2006 2007 2006   Revenues: Sales $ 110,814 $ 95,540 $ 283,341 $ 259,256 Licensing and other   1,700   1,459   5,422   3,100   112,514   96,999   288,763   262,356   Costs and Expenses: Cost of sales 38,173 34,882 95,234 97,037 Selling, general and administrative 38,723 38,390 120,350 105,375 Research and development 22,780 21,173 56,914 72,331 Restructuring 919 - 1,092 - Acquired in-process research and development   689 -   689 -   101,284   94,445   274,279   274,743   Operating income (loss) 11,230 2,554 14,484 (12,387)   Interest income 2,100 1,364 6,074 3,881 Interest expense (1,873) (1,891) (5,623) (5,813) Impairment of investment - - - (9,880) Other income (expense)   (122)   202   (89)   257   Income (loss) before minority interest and income tax 11,335 2,229 14,846 (23,942)   Minority interest   -   -   -   3,881   Income (loss) before income tax 11,335 2,229 14,846 (20,061)   Provision for income tax   485   505   1,194   458   Net income (loss) $ 10,850 $ 1,724 $ 13,652 $ (20,519)     Net income (loss) per common share Basic $ 0.14 $ 0.02 $ 0.17 $ (0.26) Diluted $ 0.13 $ 0.02 $ 0.17 $ (0.26)   Weighted average number of common shares outstanding Basic 80,239 78,583 79,841 78,196 Diluted 83,260 80,689 82,522 78,196       Consolidated Balance Sheet Data (unaudited) (In thousands)   As of September 30, As of December 31, 2007 2006   Cash and marketable debt securities, unrestricted $ 166,529 $ 162,743 Total assets $ 516,429 $ 482,975 Total stockholders' equity (a) $ 145,727 $ 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 September 30, 2007 GAAP Adjustments (1) Adjusted   Revenues: Sales $ 110,814 $ - $ 110,814 Licensing & other   1,700   -   1,700   112,514   -   112,514   Costs and Expenses: Cost of sales 38,173 (1,979) (2) 36,194 Selling, general and administrative 38,723 (4,345) (2, 3) 34,378 Research and development 22,780 (6,056) (3, 4) 16,724 Restructuring 919 (919) (5) - Acquired in-process research & development   689   (689) (6)   -   101,284   (13,988)   87,296   Operating Income 11,230 13,988 25,218   Interest income 2,100 - 2,100 Interest expense (1,873) - (1,873) Other expense   (122)   -   (122)     Income before income tax 11,335 13,988 25,323   Provision for income taxes   485   -   485   Net income $ 10,850 $ 13,988 $ 24,838     Net income per common share Basic $ 0.14 $ 0.31 Diluted $ 0.13 $ 0.30   Weighted average number of common shares outstanding Basic 80,239 80,239 Diluted 83,260 83,260   See Notes to Reconciliation of U.S. GAAP Net Income (Loss) to Adjusted Net Income - Unaudited   MGI PHARMA, INC. AND SUBSIDIARIES   RECONCILIATION OF GAAP NET INCOME TO ADJUSTED NET INCOME - UNAUDITED (In thousands, except per share data)     Three Months Ended September 30, 2006 GAAP Adjustments (1) Adjusted   Revenues: Sales $ 95,540 $ - $ 95,540 Licensing & other   1,459   -   1,459   96,999   -   96,999   Costs and Expenses: Cost of sales 34,882 (1,027) (2) 33,855 Selling, general and administrative 38,390 (2,317) (2, 3, 4, 7) 36,073 Research and development 21,173 (700) (3) 20,473         94,445   (4,044)   90,401   Operating income 2,554 4,044 6,598 - Interest income 1,364 - 1,364 Interest expense (1,891) - (1,891) Other income   202   -   202   Loss before income tax 2,229 4,044 6,273   Provision for income taxes   505   -   505   Net Income $ 1,724 $ 4,044 $ 5,768     Net loss per common share Basic $ 0.02 $ 0.07 Diluted $ 0.02 $ 0.07   Weighted average number of common shares outstanding Basic 78,583 78,583 Diluted 80,689 80,689   See Notes to Reconciliation of U.S. GAAP Net Income (Loss) to Adjusted Net Income - Unaudited   MGI PHARMA, INC. AND SUBSIDIARIES   RECONCILIATION OF GAAP NET INCOME TO ADJUSTED NET INCOME - UNAUDITED (In thousands, except per share data)   Nine Months Ended September 30, 2007 GAAP Adjustments (1) Adjusted   Revenues: Sales $ 283,341 $ - $ 283,341 Licensing & other   5,422   -   5,422   288,763   -   288,763   Costs and Expenses: Cost of sales 95,234 (5,937) (2) 89,297 Selling, general and administrative 120,350 (14,516) (2, 3, 4) 105,834 Research and development 56,914 (9,089) (3, 4) 47,825 Restructuring 1,092 (1,092) (5) - Acquired in-process research & development   689   (689) (6)   -   274,279   (31,323)   242,956   Operating income 14,484 31,323 45,807   Interest income 6,074 - 6,074 Interest expense (5,623) - (5,623) Other income   (89)   -   (89)   Income before minority interest and income tax 14,846 31,323 46,169   Minority interest   -   -   -   Income before income tax 14,846 31,323 46,169   Provision for income taxes   1,194   -   1,194   Net income $ 13,652 $ 31,323 $ 44,975     Net income per common share Basic $ 0.17 $ 0.56 Diluted $ 0.17 $ 0.55   Weighted average number of common shares outstanding Basic 79,841 79,841 Diluted 82,522 82,522   See Notes to Reconciliation of U.S. GAAP Net Income (Loss) to Adjusted Net Income - Unaudited   MGI PHARMA, INC. AND SUBSIDIARIES   RECONCILIATION OF GAAP NET LOSS TO ADJUSTED NET INCOME - UNAUDITED (In thousands, except per share data)   Nine Months Ended September 30, 2006 GAAP Adjustments (1) Adjusted   Revenues: Sales $ 259,256 $ - $ 259,256 Licensing & other   3,100   -   3,100   262,356   -   262,356   Costs and Expenses: Cost of sales 97,037 (5,377) (2) 91,660 Selling, general and administrative 105,375 (5,230) (2, 3, 4, 7) 100,145 Research and development   72,331   (5,644) (3, 9)   66,687   274,743   (16,251)   258,492   Operating (loss) income (12,387) 16,251 3,864 - Interest income 3,881 - 3,881 Interest expense (5,813) - (5,813) Impairment of investment (9,880) 9,880 (8) - Other income   257   -   257   Loss (income) before minority interest and income tax (23,942) 26,131 2,189   Minority interest   3,881   (3,881) (9)   -   Loss (income) before income tax (20,061) 22,250 2,189   Provision for income taxes   458   -   458   Net loss (income) $ (20,519) $ 22,250 $ 1,731     Net loss (income) per common share Basic $ (0.26) $ 0.02 Diluted $ (0.26) $ 0.02   Weighted average number of common shares outstanding Basic 78,196 78,196 Diluted 78,196 78,196   See Notes to Reconciliation of U.S. GAAP Net Income (Loss) to Adjusted Net Income - Unaudited MGI PHARMA, Inc. and Subsidiaries Notes to Reconciliation of U.S. GAAP Net Income (Loss) to Adjusted Net Income - Unaudited Three and Nine Months Ended September 30, 2007 and 2006 (In thousands, except per share data)         (1) Adjusted net income and adjusted per share amounts for the three-month periods and nine-month periods ended September 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. Adjusted net income per share amounts represent adjusted net income 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.                   MGI PHARMA, INC. AND SUBSIDIARIES   RECONCILIATION OF GAAP NET INCOME (LOSS) TO ADJUSTED NET INCOME - UNAUDITED (In thousands, except per share data)   Three Months Ended Nine Months Ended September 30 September 30 2007 2006 2007 2006   GAAP net income (loss) $ 10,850 $ 1,724 $ 13,652 $ (20,519)   Amortization of product intangible assets (2) 1,998 1,047 5,994 5,437   Non-cash, stock-based compensation expense (3) 5,382 2,451 18,360 6,337   License & milestone payments (4) 5,000 - 5,188 50   Restructuring expenses (5) 919 - 1,092 -   IPR&D costs (6) 689 - 689 -   Transaction costs (7) - 546 - 546   Impairment of investment (8) - - - 9,880           Adjusted net income $ 24,838 $ 5,768 $ 44,975 $ 1,731                                       MGI PHARMA, INC. AND SUBSIDIARIES   RECONCILIATION OF GAAP NET INCOME (LOSS) PER COMMON SHARE TO ADJUSTED NET INCOME PER COMMON SHARE - UNAUDITED (In thousands, except per share data)   Three Months Ended September 30 Nine Months Ended September 30 2007 2006 2007 2006   GAAP income or (loss) per diluted share $ 0.13 $ 0.02 $ 0.17 $ (0.26)   Amortization of product intangible assets (2) 0.02 0.01 0.07 0.07   Non-cash, stock-based compensation expense (3) 0.07 0.03 0.22 0.08   License & milestone payments (4) and Restructuring expenses (5)   0.07 - 0.08 -   IPR&D costs (6) 0.01 - 0.01 -   Transaction costs (7) - 0.01 - 0.01   Impairment of investment (8) - - - 0.12           Adjusted income per diluted share $ 0.30 $ 0.07 $ 0.55 $ 0.02                       (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 Nine Months Ended 2007 2006 2007 2006 Selling, general and administrative $ 4,326 $ 1,751 $ 14,271 $ 4,574 Research and development   1,056   700   4,089   1,763 $ 5,382 $ 2,451 $ 18,360 $ 6,337   (4) To exclude license and milestone payments.   (5) To exclude employee related and facility consolidation related expenses pursuant to the plan of organizational restructuring undertaken in Q4 2006.   (6) To exclude IPR&D costs related to the AkaRx transaction.   (7) To exclude transaction costs related to sale of Aggrastat.   (8) To exclude impairment of the equity investment in SuperGen, Inc.   (9) 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.