Capitalizing on a stock surge prompted by Friday's approval of a partnered cancer drug, MGI Pharma Inc. on Monday reported plans to sell 4 million shares.

Based on Friday's $31.97 closing price of the stock, the offering could gross about $128 million. The Minneapolis-based company could add about another $19 million if the underwriters exercise a 30-day, 600,000-share overallotment option. The planned sale stems from a shelf registration filed last month to sell up to $150 million of securities.

On Friday, MGI's shares (NASDAQ:MOGN) gained $5.36, a 20 percent surge after the FDA approved Aloxi (palonosetron hydrochloride). The stock price continued to climb Monday, with a $2.68 gain to close at $34.65.

"The shelf makes them that much more nimble in accessing the financial markets," David Bouchey, analyst with C.E. Unterberg, Towbin in New York, told BioWorld Today. "When the opportunity rises, they can strike right away, and obviously they showed the capability to do that."

The drug was approved to prevent acute nausea and vomiting in patients receiving first and repeat courses of moderately and highly emetogenic chemotherapy, and to prevent delayed sickness in patients receiving first and repeat courses of moderately emetogenic chemotherapy.

"Aloxi is now the only 5-HT3 receptor antagonist indicated for the prevention of both acute and delayed [chemotherapy-induced nausea and vomiting] for patients receiving moderately emetogenic cancer chemotherapy, the most frequently used regimen," MGI CEO Lonnie Moulder said during a conference call. "Because a single dose of Aloxi prior to chemotherapy provides protection from CINV for several days, we believe that patients and their caregivers will appreciate the Aloxi dosing regimen compared to other 5-HT3 receptor antagonists, which typically involve an intravenous dose followed by several days of oral therapy."

The agency approved a 0.25-mg injectable dose of Aloxi, which MGI said would be launched in mid-September.

"Aloxi could become a standard of care in oncology supportive care," Bouchey said, adding that though the drug's approval was based on non-inferiority findings from Phase III trials, data included in Aloxi's labeling show it to be superior to its competition. "There is a lot of clinical data that support the belief that oncologists may view Aloxi as different and better."

Moulder said that MGI, which in the last quarter hired an additional 30 sales employees to task Aloxi for its oncology sales force, expects to gain $40 million to $55 million in first-year sales of the drug. He added that the product would generate the lion's share of that projection during the first half of next year - coinciding with publication in peer-reviewed journals of data and analysis that could tap oncologists better than summarized results, Bouchey said.

Four years after its launch, Moulder said MGI expects to receive $250 million in annual Aloxi sales - a figure estimated to represent 25 percent of the total CINV market.

MGI paid about $38 million for U.S. and Canadian marketing rights to the drug, whose development was fully funded by Helsinn Healthcare SA. The Lugano, Switzerland-based company submitted a new drug application 10 months ago for the product, which is designed with strong receptor binding affinity and a 40-hour plasma half-life.

"Those marketing advantages are interesting because now an oncologist sees data of a drug you only have to give once instead of having patients go home with an uncertain possibility that they will fill the prescription," Bouchey said. "You can completely eliminate any potential compliance issues, it's as safe or safer and it looks to be more efficacious."

Helsinn said Phase III trials demonstrated that a single intravenous dose of Aloxi effectively prevents both acute and delayed CINV in patients receiving moderately emetogenic chemotherapy. The privately held company also will receive about one-third of MGI's sales revenue for royalties and supply costs. (See BioWorld Today, Dec. 3, 2002.)

MGI's expected revenue could push it into positive cash flow in the near term. In its most recent fiscal quarter, the company reported a $7 million net loss with $48.7 million in cash and marketable securities through June 30. MGI also reported about 25.4 million shares outstanding at the time.

"MGI has gone from a company that's been developing drugs to one that will be reporting ramping quarterly earnings," Bouchey added. "And in this market, that is indeed a very significant achievement.

"The company really views itself as a franchise in terms of acquiring, developing and marketing oncology products, and in order for them to continue that, they have to raise cash for strategic purposes," Bouchey said. "It could be anywhere from $120 million to $150 million, and that's a substantial amount of money. You can get a good drug with that. I don't know exactly how they are going to use the money, but it at least offers the potential that they could bring in a product and dramatically improve their sales revenue forecasts."

New York-based Merrill Lynch & Co. is the offering's lead underwriter, with co-management from U.S. Bancorp Piper Jaffray and Lazard Freres & Co. LLC, both of New York as well, and C.E. Unterberg, Towbin.

Beyond Aloxi, MGI's pipeline includes two other clinical cancer candidates.

The anticancer activity of irofulven (hydroxymethylacylfulvene) is being tested in Phase II trials in refractory or recurrent advanced epithelial ovarian cancer, hormone-refractory prostate cancer, recurrent malignant glioma and inoperable liver cancer. MG98 is an antisense compound in Phase I trials for in myelodysplasia and acute myeloid leukemia.