##### 



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D. C. 20549
 FORM 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2007
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File Number: 0-10736
 MGI PHARMA, INC.
 (Exact name of registrant as specified in its charter)
 Minnesota
(State or other jurisdiction of 
incorporation or organization)
    
    41-1364647
(I.R.S. employer
identification number)5775 West Old Shakopee Road 
Suite 100
Bloomington, Minnesota 55437
    
    (952) 346-4700(Address of principal executive offices and zip code)
    
    (Registrants telephone number, including area code)
 þ o
  þ o o
 o þ
  Common Stock, $.01 par value
(Class)
    
    79,774,623 shares
(Outstanding at April 23, 2007)




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##### 



MGI PHARMA, INC.
 FORM 10-Q INDEX
 PageNumberPART I. FINANCIAL INFORMATIONItem 1. Financial Statements (Unaudited)Condensed Consolidated Balance Sheets  March 31, 2007 and December 31, 2006
    
    
    3Condensed Consolidated Statements of Operations  Three Months Ended March 31, 2007 and 2006
    
    
    4Condensed Consolidated Statements of Cash Flows Three Months Ended March 31, 2007 and 2006
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    11Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    18Item 4. Controls and Procedures
    
    
    18PART II. OTHER INFORMATIONItem 1A. Risk Factors
    
    
    19Item 6. Exhibits
    
    
    19SIGNATURES
    
    
    20
 2




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##### 



PART IFINANCIAL INFORMATION
 Item 1. Financial Statements
 MGI PHARMA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
 March 31,
    
    
    December 31,2007
    
    
    2006(Unaudited)
    
    
    (Revised)*ASSETSCurrent assets:Cash and cash equivalents
    
    $
    20,863
    
    
    $
    41,024Short-term marketable investments
    
    
    140,199
    
    
    
    121,719Restricted marketable investments
    
    
    
    
    
    
    2,957Receivables, less contractual allowances and allowance for
bad debts of $46,757 and $28,149 as of March 31, 2007 and
December 31, 2006, respectively
    
    
    86,267
    
    
    
    84,464Inventories
    
    
    37,324
    
    
    
    40,293Other current assets
    
    
    5,630
    
    
    
    9,276Total current assets
    
    
    290,283
    
    
    
    299,733Restricted cash
    
    
    500
    
    
    
    500Long-term marketable investments
    
    
    29,058
    
    
    
    28,024Equipment, furniture and leasehold improvements, at cost less
accumulated depreciation of $7,965 and $7,170 as of March
31, 2007 and December 31, 2006, respectively
    
    
    9,892
    
    
    
    10,119Debt issuance costs, less accumulated amortization of $3,731
and $3,365 as of March 31, 2007 and December 31, 2006,
respectively
    
    
    5,289
    
    
    
    5,634Intangible assets, at cost less accumulated amortization of
$18,410 and $16,412 as of March 31, 2007 and December 31,
2006, respectively
    
    
    77,124
    
    
    
    79,122Goodwill
    
    
    53,593
    
    
    
    53,593Other assets
    
    
    6,312
    
    
    
    6,250Total assets
    
    $
    472,051
    
    
    $
    482,975LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    5,158
    
    
    $
    13,627Accrued expenses
    
    
    62,103
    
    
    
    77,156Current portion of long-term debt
    
    
    141
    
    
    
    179Deferred revenue
    
    
    3,016
    
    
    
    3,076Other current liabilities
    
    
    718
    
    
    
    1,522Total current liabilities
    
    
    71,136
    
    
    
    95,560Noncurrent liabilities:Senior subordinated convertible notes, face value of
$349,500 net of unamortized discount of $87,828 as of March
31, 2007 and December 31, 2006, respectively
    
    
    261,672
    
    
    
    261,672Other long-term debt, net of current portion
    
    
    125
    
    
    
    166Deferred revenue, net of current portion
    
    
    16,505
    
    
    
    16,636Other noncurrent liabilities
    
    
    3,250
    
    
    
    3,006Total noncurrent liabilities
    
    
    281,552
    
    
    
    281,480Total liabilities
    
    
    352,688
    
    
    
    377,040Stockholders equity:Preferred stock, 10,000,000 authorized and unissued shares
    
    
    
    
    
    
    Common stock, $.01 par value, 140,000,000 authorized shares,
79,738,348 and 79,195,318 issued and outstanding shares, as
of March 31, 2007 and December 31, 2006, respectively
    
    
    797
    
    
    
    792Additional paid-in capital
    
    
    587,554
    
    
    
    575,867Accumulated other comprehensive income
    
    
    10,892
    
    
    
    9,857Accumulated deficit
    
    
    (479,880
    )
    
    
    (480,581
    )Total stockholders equity
    
    
    119,363
    
    
    
    105,935Total liabilities and stockholders equity
    
    $
    472,051
    
    
    $
    482,975
 
 *
    
    Refer to Footnote 11 for complete discussion on the revision to the December 31, 2006
consolidated balance sheet.See accompanying Notes to Condensed Consolidated Financial Statements. 3




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##### 



MGI PHARMA, INC. AND SUBSIDIARIES
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
 Three Months EndedMarch 31,2007
    
    
    2006Revenues:Product sales
    
    $
    81,578
    
    
    $
    77,525Licensing and other
    
    
    1,630
    
    
    
    67883,208
    
    
    
    78,203Costs and expenses:Cost of sales
    
    
    27,606
    
    
    
    28,342Selling, general and administrative
    
    
    37,321
    
    
    
    31,519Research and development
    
    
    17,002
    
    
    
    22,967Restructuring
    
    
    381
    
    
    
    82,310
    
    
    
    82,828Income (loss) from operations
    
    
    898
    
    
    
    (4,625
    )Interest income
    
    
    2,065
    
    
    
    1,156Interest expense
    
    
    (1,876
    )
    
    
    (1,997
    )Other income (expense)
    
    
    (27
    )
    
    
    181Income (loss) before minority interest and income taxes
    
    
    1,060
    
    
    
    (5,285
    )Minority interest
    
    
    
    
    
    
    2,431Income (loss) before income taxes
    
    
    1,060
    
    
    
    (2,854
    )Provision (benefit) for income taxes
    
    
    359
    
    
    
    (47
    )Net income (loss)
    
    $
    701
    
    
    $
    (2,807
    )Net income (loss) per common share:Basic
    
    $
    0.01
    
    
    $
    (0.04
    )Diluted
    
    $
    0.01
    
    
    $
    (0.04
    )Weighted average number of common shares outstanding:Basic
    
    
    79,447
    
    
    
    77,788Diluted
    
    
    81,790
    
    
    
    77,788
  4




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##### 



MGI PHARMA, INC. AND SUBSIDIARIES
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
 Three Months Ended March 31,2007
    
    
    2006OPERATING ACTIVITIES:Net income (loss)
    
    $
    701
    
    
    $
    (2,807
    )Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:Depreciation and intangible amortization
    
    
    2,793
    
    
    
    2,251Benefit plan contribution
    
    
    
    
    
    
    507Employee stock compensation expense
    
    
    5,874
    
    
    
    1,963Excess tax benefits from stock-based compensation
    
    
    (120
    )
    
    
    (107
    )Minority interest related to SNDC
    
    
    
    
    
    
    (2,431
    )Amortization of non-cash financing charges
    
    
    366
    
    
    
    291Other
    
    
    123
    
    
    
    164Change in assets and liabilities:Receivables
    
    
    (1,803
    )
    
    
    7,558Inventories
    
    
    2,969
    
    
    
    7,957Other assets
    
    
    3,584
    
    
    
    (263
    )Accounts payable and accrued expenses
    
    
    (21,588
    )
    
    
    (15,066
    )Deferred revenue
    
    
    (191
    )
    
    
    311Other liabilities
    
    
    (559
    )
    
    
    (309
    )SNDC working capital
    
    
    
    
    
    
    (1,588
    )Net cash used in operating activities
    
    
    (7,851
    )
    
    
    (1,569
    )INVESTING ACTIVITIES:Purchase of available for sale investments
    
    
    (428,013
    )
    
    
    (197,647
    )Maturity of available for sale investments
    
    
    409,533
    
    
    
    147,040Maturity of investments held by SNDC
    
    
    
    
    
    
    4,019Maturity of held-to-maturity investments
    
    
    
    
    
    
    27,245Purchase of equipment, furniture and leasehold improvements
    
    
    (569
    )
    
    
    (2,535
    )Other
    
    
    
    
    
    
    7Net cash used in investing activities
    
    
    (19,049
    )
    
    
    (21,871
    )FINANCING ACTIVITIES:Maturity of restricted marketable securities held by trustee for debt service
    
    
    2,957
    
    
    
    2,893Issuance cost of revolving credit facility
    
    
    (21
    )
    
    
    Cash consideration from issuance of shares under stock plans
    
    
    3,762
    
    
    
    2,709Excess tax benefits from stock-based compensation
    
    
    120
    
    
    
    107Payments on long-term debt
    
    
    (79
    )
    
    
    (370
    )Net cash provided by financing activities
    
    
    6,739
    
    
    
    5,339Decrease in cash and cash equivalents
    
    
    (20,161
    )
    
    
    (18,101
    )Cash and cash equivalents at beginning of period
    
    
    41,024
    
    
    
    51,136Cash and cash equivalents at end of period
    
    $
    20,863
    
    
    $
    33,035Supplemental disclosure of cash information:Cash paid for interest
    
    $
    2,968
    
    
    $
    3,043Cash paid for taxes
    
    $
    
    
    
    $
    
  5




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##### 



MGI PHARMA, INC. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
 1. Basis of Presentation
  Accounting Policies:
   Concentration of Supply Risk:
 Income Taxes: Accounting for Uncertainty in Income Taxes An Interpretation of FASB Statement No. 109
  Recent Accounting Pronouncements:
 Fair Value Measurements
 6




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##### 



2. Stock Incentive Plans
  Shareholder
    
    
    
    
    
    
    TotalApproved
    
    
    Other
    
    
    For All(in thousands, except exercise price)
    
    Plans
    
    
    Plans
    
    
    PlansShares issuable under outstanding awards
    
    
    12,146
    
    
    
    39
    
    
    
    12,185Shares available for future issuance
    
    
    5,177
    
    
    
    
    
    
    
    5,177Total
    
    
    17,323
    
    
    
    39
    
    
    
    17,362Average exercise price for outstanding options
    
    $
    17.73
    
    
    $
    5.12
    
    
    $
    17.69
  For the three months endedMarch 31,(in thousands, except per share data)
    
    2007
    
    2006Amounts charged against earnings (loss), before income tax benefits
    
    $
    5,874
    
    
    $
    1,963
  Three months endedMarch 31,2007
    
    
    2006Selling, general, and administrative
    
    $
    4,501
    
    
    $
    1,467Research and development
    
    
    1,373
    
    
    
    496Total
    
    $
    5,874
    
    
    $
    1,963
  Three months ended March 31,2007
    
    2006Expected dividend yield
    
    
    0
    %
    
    
    0
    %Risk-free interest rate
    
    
    4.72
    %
    
    
    4.69
    %Expected volatility
    
    
    0.42
    
    
    
    0.43Expected life, in years
    
    
    5.40-6.66
    
    
    
    5.40-6.02
  3. Net Income (Loss) Per Common Share
  Three MonthsEnded March 31,(in thousands)
    
    2007
    
    
    2006Weighted-average shares  basic
    
    
    79,447
    
    
    
    77,788Effect of dilutive share-based awards
    
    
    2,343
    
    
    
    Effect of convertible debt
    
    
    
    
    
    
    Weighted-average shares  assuming dilution
    
    
    81,790
    
    
    
    77,788
 7




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##### 



4. Marketable Investments
  March 31,
    
    December 31,(in thousands)
    
    2007
    
    2006Short-term marketable investments:Auction rate securities (classified as available-for-sale)
    
    $
    140,199
    
    
    $
    121,719Long-term marketable investments:Equity securities (classified as available-for-sale)
    
    $
    29,058
    
    
    $
    28,024
  Accounting for Certain Investments in Debt
and Equity Securities
   March 31, 2007Gross
    
    GrossUnrealized
    
    Unrealized
    
    Fair(in thousands)
    
    Cost Basis
    
    Gains
    
    Losses
    
    ValueEquity Securities (classified as available for sale)
    
    $
    18,166
    
    
    $
    10,892
    
    
    $
    
    
    
    $
    29,058
 December 31, 2006Gross
    
    GrossUnrealized
    
    Unrealized
    
    Fair(in thousands)
    
    Cost Basis
    
    Gains
    
    Losses
    
    ValueEquity Securities (classified as available for sale)
    
    $
    18,166
    
    
    $
    9,858
    
    
    $
    
    
    
    $
    28,024
 8




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##### 



5. Inventories
  March 31,
    
    
    December 31,(in thousands)
    
    2007
    
    
    2006Raw materials and supplies
    
    $
    723
    
    
    $
    705Work in process
    
    
    1,281
    
    
    
    885Finished products
    
    
    35,090
    
    
    
    38,484Inventory on consignment
    
    
    230
    
    
    
    219Total
    
    $
    37,324
    
    
    $
    40,293
  6. Accrued Expenses
  March 31,
    
    
    December 31,(in thousands)
    
    2007
    
    
    2006 (Revised)Product rebate, administrative, and other fees
    
    $
    18,142
    
    
    $
    16,590License fees
    
    
    9,637
    
    
    
    8,619Employee compensation
    
    
    8,890
    
    
    
    17,346Product development
    
    
    7,662
    
    
    
    11,412Other
    
    
    17,772
    
    
    
    23,189Total
    
    $
    62,103
    
    
    $
    77,156
 7. Stockholders Equity
  Common StockAccumulatedAdditional
    
    
    otherpaid-in
    
    
    comprehensive(in thousands)
    
    Shares
    
    
    Par value
    
    
    capital
    
    
    income (loss)Balance at December 31, 2006
    
    
    79,195
    
    
    $
    792
    
    
    $
    575,867
    
    
    $
    9,857Stock compensation plans, including income tax benefit of $120
    
    
    439
    
    
    
    4
    
    
    
    9,873
    
    
    
    Employee benefit plan contribution
    
    
    104
    
    
    
    1
    
    
    
    1,814
    
    
    
    Unrealized gain on available for sale equity securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,035Balance at March 31, 2007
    
    
    79,738
    
    
    $
    797
    
    
    $
    587,554
    
    
    $
    10,892
 8. Research and Development Expense
  Three Months Ended March 31,(in thousands)
    
    2007
    
    
    2006License fees
    
    $
    120
    
    
    $
    Other research and development
    
    
    16,882
    
    
    
    22,967Total
    
    $
    17,002
    
    
    $
    22,967
 9. Comprehensive Income
  Three Months Ended March 31,(in thousands)
    
    2007
    
    
    2006Net income (loss), as reported
    
    $
    701
    
    
    $
    (2,807
    )Unrealized gain from securities classified as available for sale
    
    
    1,035
    
    
    
    5,908Comprehensive income
    
    $
    1,736
    
    
    $
    3,101
 9




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##### 



10. Restructuring
  (in thousands)Liability for restructuring costs at December 31, 2006, as reported
    
    $
    1,276Revision made in the first quarter of 2007
    
    
    939Liability for restructuring costs at December 31, 2006, as revised
    
    
    2,215Accruals
    
    
    381Cash payments
    
    
    (865
    )Liability for restructuring costs at March 31, 2007
    
    $
    1,731
 11. Prior Period Misstatements
 Accounting for
Costs Associated with Exit or Disposal Activities, Employers
Accounting for Postemployment Benefits. Considering the Effects of Prior
Year Misstatements when Quantifying Misstatements in Current Year Financial Statements
 December 31, 2006
    
    
    
    
    
    
    December 31, 2006(in thousands, except per share data)
    
    As Reported
    
    
    Revision
    
    
    RevisedConsolidated Statement of Operations  Year ended December 31, 2006Cost and Expenses:Cost of sales
    
    $
    123,415
    
    
    $
    
    
    
    $
    123,415Selling, general, and administrative
    
    
    148,383
    
    
    
    
    
    
    
    148,383Research and development
    
    
    100,117
    
    
    
    
    
    
    
    100,117Restructuring
    
    
    2,107
    
    
    
    939
    
    
    
    3,046Total operating expenses
    
    $
    374,022
    
    
    $
    939
    
    
    $
    374,961Net loss
    
    $
    (40,161
    )
    
    $
    (939
    )
    
    $
    (41,100
    )Net loss per common share:Basic
    
    $
    (0.51
    )
    
    $
    (0.01
    )
    
    $
    (0.52
    )Diluted
    
    $
    (0.51
    )
    
    $
    (0.01
    )
    
    $
    (0.52
    )Consolidated Statement of Operations  Three months ended December
31, 2006Cost and Expenses:Cost of sales
    
    $
    26,378
    
    
    $
    
    
    
    $
    26,378Selling, general, and administrative
    
    
    43,011
    
    
    
    
    
    
    
    43,011Research and development
    
    
    27,785
    
    
    
    
    
    
    
    27,785Restructuring
    
    
    2,107
    
    
    
    939
    
    
    
    3,046Total operating expenses
    
    $
    99,281
    
    
    $
    939
    
    
    $
    100,220Net loss
    
    $
    (19,643
    )
    
    $
    (939
    )
    
    $
    (20,582
    )Net loss per common share:Basic
    
    $
    (0.25
    )
    
    $
    (0.01
    )
    
    $
    (0.26
    )Diluted
    
    $
    (0.25
    )
    
    $
    (0.01
    )
    
    $
    (0.26
    )Consolidated Balance SheetAccrued expenses
    
    $
    76,217
    
    
    $
    939
    
    
    $
    77,156Total current liabilities
    
    
    94,621
    
    
    
    939
    
    
    
    95,560Total liabilities
    
    
    376,101
    
    
    
    939
    
    
    
    377,040Accumulated deficit
    
    
    (479,642
    )
    
    
    (939
    )
    
    
    (480,581
    )Total stockholders equity
    
    $
    106,874
    
    
    $
    (939
    )
    
    $
    105,935
 10




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##### 



Item 2.
 From time to time in this quarterly report we make statements that reflect our current expectations
regarding our future results of operations, economic performance, and financial condition, as well
as other matters that may affect our business. In general, we try to identify these forward-looking
statements by using words such as anticipate, believe, expect, estimate and similar
expressions.
 The forward-looking statements may cover, but are not necessarily limited to, the following topics:
(1) efforts to market, sell and distribute Aloxi® Injection in the United States and Canada; (2)
efforts to market, sell and distribute Gliadel® Wafer; (3) efforts to develop, market, sell, and
distribute Dacogen® for Injection (4) the clinical development of Dacogen® for Injection, Saforis
Powder for Oral Suspension, amolimogene bepiplasmid (formerly known as ZYC101a), Aloxi® Injection
for PONV, Aquavan® Injection, and other clinical compounds; (5) efforts to secure adequate supply
of the active pharmaceutical ingredients for clinical development and commercialization; (6)
efforts to manufacture drug candidates for clinical development and eventual commercial supply; (7)
strategic plans; (8) anticipated expenditures and the potential need for additional funds; and (9)
specific guidance we give regarding our current expectations of our future operating results.
 All of these items involve significant risks and uncertainties. These and any of the other
statements we make in this quarterly report that are forward-looking are made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995. We caution you that our
actual results may differ significantly from the results we discuss in these forward-looking
statements.
 We discuss some factors that could cause or contribute to such differences in the Risk Factors
section of our Annual Report on Form 10-K for the year ended December 31, 2006, that we have
previously filed with the Securities and Exchange Commission. In addition, any forward-looking
statements we make in this document speak only as of the date of this document, and we do not
intend to update any such forward-looking statements to reflect events or circumstances that occur
after that date.
 We have registered Hexalen®, Salagen®, Aquavan®, Gliadel®, and Saforis as trademarks with
the U.S. Patent and Trademark Office. All other trademarks used in this report are the property of
their respective owners. Aloxi® is a registered trademark of Helsinn Healthcare SA. Dacogen® is
a trademark of SuperGen, Inc. Aggrastat® is a registered trademark of Medicure Inc. in the United
States.
 Managements Discussion and Analysis of Financial Condition and Results of Operations
 Business Overview 
    MARKETABLE PRODUCTS
 Products
    
    Principal Indications
    
    Status
    
    Commercial RightsAloxi Injection
    
    chemotherapy-induced nausea and vomiting
(CINV)
    
    Currently marketed
    
    U.S. & Canada: MGI PHARMADacogen for Injection
    
    myelodysplastic syndromes (MDS)
    
    Currently marketed
    
    North America: MGI PHARMA
Rest of World: Cilag GmbH
(regulatory approvals pending)Gliadel Wafer
    
    Malignant glioma at time of initial surgery
Glioblastoma multiforme (GBM)
    
    Currently marketed
    
    U.S.: MGI PHARMA
Outside U.S.: Various collaboratorsCurrently marketed
    
    U.S.: MGI PHARMA
Outside U.S.: Various collaborators
 11




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##### 



Products
    
    Principal Indications
    
    Status
    
    Commercial RightsSalagen Tablets
    
    Symptoms of radiation-induced dry mouth in
head and neck cancer patients
Dry mouth, plus dry eyes outside the U.S.,
in Sjögrens syndrome patients
    
    Currently marketed
    
    U.S.: MGI PHARMA
Europe: Novartis
Canada: Pfizer
Rest of World: Various other
collaboratorsHexalen capsules
    
    Ovarian Cancer
    
    Currently marketed
    
    U.S.: MGI PHARMA
Outside U.S.: Various collaborators
  PRODUCT CANDIDATES AND RESEARCH PIPELINE
 Products
    
    Principal Indications
    
    Status
    
    SponsorAloxi Injection
    
    PONV
    
    Phase 3 completed
    
    Helsinn HealthcareAloxi Capsules
    
    CINV
    
    Phase 3 completed
    
    Helsinn HealthcareDacogen for Injection
    
    AML
    
    Phase 2 & 3
    
    MGI PHARMAAquavan Injection
    
    Minimal to moderate sedation of
patients undergoing brief diagnostic
or surgical procedures
    
    Phase 3 completed
    
    MGI PHARMASaforis Powder for 
Oral Suspension
    
    Oral mucositis
    
    Food and Drug
Administration
(FDA) approvable
letter received
October 12, 2006
    
    MGI PHARMAamolimogene
bepiplasmid
(formerly known as
ZYC101a)
    
    Cervical dysplasia
    
    Pivotal trial ongoing
    
    MGI PHARMAirofulven
    
    Hormone refractory prostate cancer
(HRPC) with capecitabine
    
    Phase 2
    
    MGI PHARMAHRPC combination with oxaliplatin
    
    Phase 2
    
    MGI PHARMAZYC300
    
    Solid tumors
    
    Phase 1/2
    
    MGI PHARMAPARP Inhibitors
    
    Cancer chemosensitization and
radiosensitization
    
    Preclinical
    
    MGI PHARMAGCP II Inhibitors
    
    Chemotherapy induced neuropathy
    
    Preclinical
    
    MGI PHARMA
  12




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##### 



Results of Operations
  Revenues
  Three Months Ended March 31,(in thousands)
    
    2007
    
    
    2006
    
    
    Change
    
    
    % ChangeProduct sales:Aloxi Injection
    
    $
    47,317
    
    
    $
    63,300
    
    
    $
    (15,983
    )
    
    
    (25
    )%Dacogen
    
    
    23,097
    
    
    
    
    
    
    
    23,097
    
    
    
    N/AGliadel Wafer
    
    
    9,733
    
    
    
    9,664
    
    
    
    69
    
    
    
    1Other
    
    
    1,431
    
    
    
    4,561
    
    
    
    (3,130
    )
    
    
    (69
    )Total product sales
    
    
    81,578
    
    
    
    77,525
    
    
    
    4,053
    
    
    
    5Licensing and other
    
    
    1,630
    
    
    
    678
    
    
    
    952
    
    
    
    140Total revenues
    
    $
    83,208
    
    
    $
    78,203
    
    
    $
    5,005
    
    
    
    6
    %
 Product Sales:
 
    
    Aloxi net sales revenue was $47.3 million, or 58%, and $63.3 million, or 82% of our
product sales revenue for the three months ended March 31, 2007 and 2006, respectively.
    
    Dacogen net sales revenue was $23.1 million, or 28% of our product sales revenue for the
three months ended March 31, 2007. We began our commercial launch of Dacogen during the
second quarter of 2006 and therefore did not have sales of Dacogen for the three months
ended March 31, 2006.
    
    Gliadel net sales revenue was $9.7 million, or 12%, and $9.7 million, or 12% of our
product sales revenue for the three months ended March 31, 2007 and 2006, respectively.
  13




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##### 



Licensing and other:
 Costs and Expenses
 Three Months Ended March 31,(in thousands)
    
    2007
    
    
    2006
    
    
    Change
    
    
    % ChangeCosts and expenses:Cost of sales
    
    $
    27,606
    
    
    $
    28,342
    
    
    $
    (736
    )
    
    
    (3
    )%Selling, general and administrative
    
    
    37,321
    
    
    
    31,519
    
    
    
    5,802
    
    
    
    18Research and development
    
    
    17,002
    
    
    
    22,967
    
    
    
    (5,965
    )
    
    
    (26
    )Restructuring
    
    
    381
    
    
    
    
    
    
    
    381
    
    
    
    N/ATotal
    
    $
    82,310
    
    
    $
    82,828
    
    
    $
    (518
    )
    
    
    N/A
 Cost of sales:
 Selling, general and administrative:
 Research and development:
 Restructuring:
 Interest Income and Expense and Other Income
 Three Months Ended March 31,(in thousands)
    
    2007
    
    
    2006
    
    
    Change
    
    
    % ChangeInterest income
    
    $
    2,065
    
    
    $
    1,156
    
    
    $
    909
    
    
    
    79
    %Interest expense
    
    
    (1,876
    )
    
    
    (1,997
    )
    
    
    121
    
    
    
    6Other income
    
    
    (27
    )
    
    
    181
    
    
    
    (208
    )
    
    NM
    *Total
    
    $
    162
    
    
    $
    (660
    )
    
    $
    822
    
    
    NM
    *
 
 *
    
    Not Meaningful
 Interest Income
 14




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##### 



Interest Expense
 Other income:
 Provision for Income Taxes
  Net Income (Loss)
  Liquidity and Capital Resources
   Activities of SNDC
 Consolidation of Variable Interest
Entities
  15




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##### 



Net Cash Used in Operating Activities
  Net Cash Used in Investing Activities
  Net Cash Provided by Financing Activities
  Cash Uses and Capital Raising Activities
  
    
    fund our research and development and drug discovery efforts;
    
    expand our portfolio of marketed products and product candidates, including through
additional product or product candidate acquisitions or business combinations;
    
    develop products we have discovered, acquired, or licensed;
    
    fund our sales and marketing efforts;
    
    fund operating losses; and
    
    support our contractual obligations and debt service requirements.
   
    
    the revenue from Aloxi, Dacogen, Gliadel, and our other products;
    
    the future expenditures we may make to increase revenue from our products;
    
    the progress of our research and development programs;
    
    the progress of pre-clinical and clinical testing;
    
    the time and cost involved in obtaining regulatory approval;
    
    the cost of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights;
 16




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##### 




    
    the changes in our existing research relationships, competing technological and marketing developments;
    
    our ability to establish collaborative arrangements and to enter into licensing
agreements and contractual arrangements with others;
    
    the conversion of our senior subordinated convertible notes;
    
    the costs of additional product or product candidate acquisitions or business combinations; and
    
    any future change in our business strategy.
  Impact of Recently Issued Accounting Standards
 Fair Value Measurements
 Application of Critical Accounting Policies and Estimates
 Income Taxes: Accounting for Uncertainty in Income Taxes An Interpretation of FASB Statement No. 109
   17




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##### 



Item 3.
 Quantitative and Qualitative Disclosures About Market Risk
  Equity Price Risk
  Hypothetical PercentageEstimated Fair Value at
    
    Hypothetical Price
    
    Estimated Fair Value after
    
    Increase (Decrease) inMarch 31, 2007
    
    Change
    
    Hypothetical Price Change
    
    Stockholders EquityEquity Securities
    
    $
    29,058
    
    
    
    10
    %
    
    $
    31,964
    
    
    
    2.7
    %(10
    )%
    
    
    26,152
    
    
    
    (2.7
    )%20
    %
    
    
    34,870
    
    
    
    5.4
    %(20
    )%
    
    
    23,246
    
    
    
    (5.4
    )%30
    %
    
    
    37,775
    
    
    
    8.1
    %(30
    )%
    
    
    20,341
    
    
    
    (8.1
    )%
 Item 4.
 Controls and Procedures
     18




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##### 



PART II  OTHER INFORMATION
 Item 1A. Risk Factors
  Item 6. Exhibits
 ExhibitNo.
    
    Description10.1
    
    Form of Executive Termination Agreement (filed herewith).31.1
    
    Certification of Leon O. Moulder, Jr. Pursuant to Rule 13a-14(a) (Section 302 of the Sarbanes-Oxley Act of 2002).31.2
    
    Certification of William F. Spengler Pursuant to Rule 13a-14(a) (Section 302 of the Sarbanes-Oxley Act of 2002).32.1
    
    Certification of Leon O. Moulder, Jr. Pursuant to 18 U.S.C. (S) 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.32.2
    
    Certification of William F. Spengler Pursuant to 18 U.S.C. (S) 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
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##### 



SIGNATURES
  MGI PHARMA, INC.Date: April 27, 2007
    
    By:
    
    /s/ William F. SpenglerWilliam F. SpenglerExecutive Vice President and Chief Financial Officer(principal financial officer, and duly authorized officer)
 20