MGI Pharma received Merrill buy rating

Merrill Lynch has awarded a buy rating to MGI Pharma Inc. with a price objective of $28. Results are expected in the fourth quarter from a study evaluating MGI's Aquavan as an agent for moderate sedation in colonoscopy.

Analyst Eric Ende said that if data for Aquavan can demonstrate a better product profile, the drug could justify its significantly higher price versus exiting drugs. Should this happen, he projected peak sales at more than $200 million. Key differentiating features could include rapid onset of action and quick recovery.

Ende described MGI's Aloxi, used for post-operative nausea and vomiting, as a risk, since slow market growth and sales have been disappointing. He said the stock already reflects risk associated with the drug, however, and estimated that Aloxi is worth about $19 per share, assuming peak sales of $300 million.

Shares of the Bloomingto, Minn.-based pharmaceutical were up $0.86, or 4.06%, at $22.03 on volume of 2,348,118 shares versus the three-month running average of 1,340,320 shares.

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