##### 



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D. C. 20549
 FORM 10-Q/A
 (Amendment No. 1)
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2006
 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
(Address of principal executive offices and zip code)
    
    (952) 346-4700
(Registrants telephone number, including area code)
 þ o
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer o
 o þ
  Common Stock, $.01 par value
(Class)
    
    78,517,717 shares
(Outstanding at July 31, 2006)




---



##### 



EXPLANATORY NOTE
  Consolidation of Variable Interest Entities




---



##### 





Effects of the Restatement




AsOriginally
    
    SNDC
    
    As(in thousands)
    

Reported
    
    
    Adjustment
    
    

RestatedNet cash provided by (used in) operating activities
    
    $
    3,631
    
    
    
    ($4,898
    )
    
    
    ($1,267
    )Net cash used in investing activities
    
    
    (44,040
    )
    
    
    4,898
    
    
    
    (39,142
    )Net cash provided by financing activities
    
    
    6,625
    
    
    
    
    
    
    
    6,625Decrease in cash and cash equivalents
    
    
    ($33,784
    )
    
    
    
    
    
    
    ($33,784
    )




---



##### 



MGI PHARMA, INC.
 FORM 10-Q/A INDEX
 PageNumberPART I. FINANCIAL INFORMATIONItem 1. Financial Statements (Unaudited)Condensed Consolidated Balance Sheets  June 30, 2006 and December 31, 2005
    
    
    3Condensed Consolidated Statements of Operations  Three and Six Months Ended June 30, 2006 and 2005
    
    
    4Condensed Consolidated Statements of Cash Flows  Six Months Ended June 30, 2006 and 2005
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    18Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    27Item 4. Controls and Procedures
    
    
    27PART II. OTHER INFORMATIONItem 1A: Risk Factors
    
    
    28Item 4. Submissions of Matter to a Vote of Security Holders
    
    
    30Item 6. Exhibits
    
    
    30SIGNATURES
    
    
    31
 2




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##### 



PART IFINANCIAL INFORMATION
 Item 1. Financial Statements
 MGI PHARMA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
 June 30,
    
    
    December 31,2006
    
    
    2005 (*)(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    17,352
    
    
    $
    51,136Short-term marketable investments
    
    
    73,751
    
    
    
    53,067Restricted cash, current
    
    
    121
    
    
    
    750Restricted marketable investments, current
    
    
    5,816
    
    
    
    5,822Investments held by SNDC
    
    
    
    
    
    
    18,580Receivables, less contractual allowances and allowance for bad debts
of $48,148 and $37,118, respectively
    
    
    109,312
    
    
    
    105,959Inventories
    
    
    39,413
    
    
    
    49,392Other current assets
    
    
    1,046
    
    
    
    1,558Total current assets
    
    
    246,811
    
    
    
    286,264Restricted cash, less current portion
    
    
    1,604
    
    
    
    1,101Long-term marketable investments
    
    
    20,330
    
    
    
    23,952Restricted marketable investments, less current portion
    
    
    
    
    
    
    2,859Equipment, furniture and leasehold improvements, at cost less accumulated
depreciation of $5,793 and $4,810, respectively
    
    
    8,721
    
    
    
    5,647Debt issuance costs, less accumulated amortization
of $2,712 and $2,131, respectively
    
    
    5,424
    
    
    
    6,005Intangible assets, at cost less accumulated
amortization of $13,169 and $8,779, respectively
    
    
    90,675
    
    
    
    73,505Goodwill
    
    
    66,183
    
    
    
    70,203Other assets
    
    
    1,374
    
    
    
    2,049Total assets
    
    $
    441,122
    
    
    $
    471,585LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    12,007
    
    
    $
    19,463Accrued expenses
    
    
    51,370
    
    
    
    54,050Current portion of long-term debt
    
    
    376
    
    
    
    1,563Deferred revenue, current
    
    
    2,242
    
    
    
    318Other current liabilities
    
    
    1,022
    
    
    
    1,430Total current liabilities
    
    
    67,017
    
    
    
    76,824Noncurrent liabilities:Senior subordinated convertible notes, face value of
$349,500 net of unamortized discount of $87,828
    
    
    261,672
    
    
    
    261,672Other long-term debt, net of current portion
    
    
    242
    
    
    
    359Deferred revenue, net of current portion
    
    
    2,004
    
    
    
    2,540Other noncurrent liabilities
    
    
    5,416
    
    
    
    6,367Total noncurrent liabilities
    
    
    269,334
    
    
    
    270,938Total liabilities
    
    
    336,351
    
    
    
    347,762Commitments and contingent liabilities
    
    
    
    
    
    
    Minority interest
    
    
    
    
    
    
    14,798Stockholders equity:Preferred stock, 10,000,000 authorized and unissued shares
    
    
    
    
    
    
    Common stock, $.01 par value, 140,000,000 authorized shares,
78,413,865 and 77,583,796 issued and outstanding shares, respectively
    
    
    784
    
    
    
    776Additional paid-in capital
    
    
    567,802
    
    
    
    557,841Unearned compensation
    
    
    (4,255
    )
    
    
    (6,013
    )Accumulated other comprehensive income (loss)
    
    
    2,164
    
    
    
    (4,098
    )Accumulated deficit
    
    
    (461,724
    )
    
    
    (439,481
    )Total stockholders equity
    
    
    104,771
    
    
    
    109,025Total liabilities and stockholders equity
    
    $
    441,122
    
    
    $
    471,585
 
 (*)
    
    The Balance Sheet at December 31, 2005 has been derived from the audited consolidated
financial statements at that date but does not include all of the information and footnotes
required by U.S. generally accepted accounting principles for complete financial statements.  3




---



##### 



MGI PHARMA, INC. AND SUBSIDIARIES
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Revenues:Product sales
    
    $
    86,190
    
    
    $
    65,318
    
    
    $
    163,715
    
    
    $
    127,703Licensing and other
    
    
    963
    
    
    
    1,844
    
    
    
    1,641
    
    
    
    2,69487,153
    
    
    
    67,162
    
    
    
    165,356
    
    
    
    130,397Costs and expenses:Cost of sales
    
    
    33,813
    
    
    
    22,920
    
    
    
    62,155
    
    
    
    44,836Selling, general and administrative
    
    
    35,463
    
    
    
    16,974
    
    
    
    66,985
    
    
    
    35,591Research and development
    
    
    28,192
    
    
    
    14,248
    
    
    
    51,157
    
    
    
    24,70197,468
    
    
    
    54,142
    
    
    
    180,297
    
    
    
    105,128Income (loss) from operations
    
    
    (10,315
    )
    
    
    13,020
    
    
    
    (14,941
    )
    
    
    25,269Interest income
    
    
    1,361
    
    
    
    1,747
    
    
    
    2,517
    
    
    
    3,104Interest expense
    
    
    (1,925
    )
    
    
    (1,754
    )
    
    
    (3,922
    )
    
    
    (3,510
    )Other-than-temporary impairment of investment
    
    
    (9,880
    )
    
    
    
    
    
    
    (9,880
    )
    
    
    Other income (expense)
    
    
    (126
    )
    
    
    
    
    
    
    55
    
    
    
    Income (loss) before minority interest and income taxes
    
    
    (20,885
    )
    
    
    13,013
    
    
    
    (26,171
    )
    
    
    24,863Minority interest
    
    
    1,450
    
    
    
    
    
    
    
    3,881
    
    
    
    Income (loss) before income taxes
    
    
    (19,435
    )
    
    
    13,013
    
    
    
    (22,290
    )
    
    
    24,863Provision (benefit) for income taxes
    
    
    
    
    
    
    305
    
    
    
    (47
    )
    
    
    555Net income (loss)
    
    $
    (19,435
    )
    
    $
    12,708
    
    
    $
    (22,243
    )
    
    $
    24,308Net income (loss) per common share:Basic
    
    $
    (0.25
    )
    
    $
    0.18
    
    
    $
    (0.29
    )
    
    $
    0.34Diluted
    
    $
    (0.25
    )
    
    $
    0.17
    
    
    $
    (0.29
    )
    
    $
    0.32Weighted average number of common shares outstanding:Basic
    
    
    78,210
    
    
    
    71,768
    
    
    
    78,000
    
    
    
    71,558Diluted
    
    
    78,210
    
    
    
    75,703
    
    
    
    78,000
    
    
    
    75,691
  4




---



##### 



MGI PHARMA, INC. AND SUBSIDIARIES
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
 Six Months Ended June 30,2006(Restated)
    
    
    2005OPERATING ACTIVITIES:Net income (loss)
    
    $
    (22,243
    )
    
    $
    24,308Adjustments for non-cash items:Depreciation and intangible amortization
    
    
    5,385
    
    
    
    1,670Benefit plan contribution
    
    
    915
    
    
    
    226Employee stock compensation expense
    
    
    3,993
    
    
    
    1,804Excess tax benefits from stock-based compensation
    
    
    (107
    )
    
    
    Stock option term modification
    
    
    
    
    
    
    326Other-than-temporary impairment of investment
    
    
    9,880
    
    
    
    Amortization of non-cash financing charges
    
    
    581
    
    
    
    581Minority interest related to SNDC
    
    
    (3,881
    )
    
    
    Other
    
    
    259
    
    
    
    Change in assets and liabilities (net of acquisitions):Receivables
    
    
    (2,943
    )
    
    
    (8,345
    )Inventories
    
    
    10,971
    
    
    
    (27,904
    )Other assets
    
    
    430
    
    
    
    (149
    )Accounts payable and accrued expenses
    
    
    (4,242
    )
    
    
    (18,773
    )Deferred revenue
    
    
    1,388
    
    
    
    (7
    )Other liabilities
    
    
    (636
    )
    
    
    (45
    )SNDC working capital
    
    
    (1,017
    )
    
    
    Net cash
used in operating activities
    
    
    (1,267
    )
    
    
    (26,308
    )INVESTING ACTIVITIES:Purchase of available for sale investments
    
    
    (481,835
    )
    
    
    (1,025,484
    )Maturity of available for sale investments
    
    
    424,151
    
    
    
    1,023,685Maturity of investments held by SNDC
    
    
    14,533
    
    
    
    Distribution
of SNDC funds to SNDC investors
    
    
    (9,635
    )
    
    
    Purchase of held-to-maturity investments
    
    
    
    
    
    
    38,053Maturity of held-to-maturity investments
    
    
    37,000
    
    
    
    67,150Purchase of equipment, furniture and leasehold improvements
    
    
    (4,083
    )
    
    
    (1,139
    )Dacogen license agreement milestone payment
    
    
    (20,000
    )
    
    
    Other
    
    
    727
    
    
    
    Net cash provided by (used in) investing activities
    
    
    (39,142
    )
    
    
    26,159FINANCING ACTIVITIES:Maturity of restricted marketable securities held by trustee for debt service
    
    
    2,865
    
    
    
    2,827Cash consideration from issuance of shares under stock plans
    
    
    4,953
    
    
    
    4,609Excess tax benefits from stock-based compensation
    
    
    107
    
    
    
    Payments on long-term debt
    
    
    (1,300
    )
    
    
    Net cash provided by financing activities
    
    
    6,625
    
    
    
    7,436Increase (decrease) in cash and cash equivalents
    
    
    (33,784
    )
    
    
    7,287Cash and cash equivalents at beginning of period
    
    
    51,136
    
    
    
    10,098Cash and cash equivalents at end of period
    
    $
    17,352
    
    
    $
    17,385Supplemental
disclosure of cash and non-cash information:Cash paid for interest
    
    $
    3,072
    
    
    $
    2,927Cash paid for taxes
    
    $
    
    
    
    $
    214
  5




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##### 



MGI PHARMA, INC. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
 1. Restatement
 Consolidation of Variable Interest Entities
    Effects of the Restatement
  6




---



##### 



MGI PHARMA, INC. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
 Six months ended June 30, 2006(in thousands)
    
    As reported
    
    
    Adjustment
    
    
    As restatedOPERATING ACTIVITIES:Net income (loss)
    
    $
    (22,243
    )
    
    $
    
    
    
    $
    (22,243
    )Adjustments for non-cash items:Depreciation and intangible amortization
    
    
    5,385
    
    
    
    
    
    
    
    5,385Benefit plan contributions
    
    
    915
    
    
    
    
    
    
    
    915Employee stock compensation expense
    
    
    3,993
    
    
    
    
    
    
    
    3,993Excess tax benefits from stock-based compensation
    
    
    (107
    )
    
    
    
    
    
    
    (107
    )Other-than-temporary impairment to investment
    
    
    9,880
    
    
    
    
    
    
    
    9,880Amortization of non-cash financing charges
    
    
    581
    
    
    
    
    
    
    
    581Minority interest related to SNDC
    
    
    
    
    
    
    (3,881
    )
    
    
    (3,881
    )Other
    
    
    259
    
    
    
    
    
    
    
    259Change in assets and liabilities (net of acquisitions and divestiture):Receivables
    
    
    (2,943
    )
    
    
    
    
    
    
    (2,943
    )Inventories
    
    
    10,971
    
    
    
    
    
    
    
    10,971Other assets
    
    
    430
    
    
    
    
    
    
    
    430Accounts payable and accrued expenses
    
    
    (4,242
    )
    
    
    
    
    
    
    (4,242
    )Deferred revenue
    
    
    1,388
    
    
    
    
    
    
    
    1,388Other liabilities
    
    
    (636
    )
    
    
    
    
    
    
    (636
    )SNDC working capital
    
    
    
    
    
    
    (1,017
    )
    
    
    (1,017
    )Net cash provided by (used in) operating activities
    
    
    3,631
    
    
    
    (4,898
    )
    
    
    (1,267
    )INVESTING ACTIVITIES:Purchase of available for sale investments
    
    
    (481,835
    )
    
    
    
    
    
    
    (481,835
    )Maturity of available for sale investments
    
    
    424,151
    
    
    
    
    
    
    
    424,151Maturity of investments held by SNDC
    
    
    
    
    
    
    14,533
    
    
    
    14,533Distribution
of SNDC funds to SNDC investors
    
    
    
    
    
    
    (9,635
    )
    
    
    (9,635
    )Maturity of held-to-maturity investments
    
    
    37,000
    
    
    
    
    
    
    
    37,000Purchase of equipment, furniture, and leasehold improvements
    
    
    (4,083
    )
    
    
    
    
    
    
    (4,083
    )Dacogen license agreement milestone payments
    
    
    (20,000
    )
    
    
    
    
    
    
    (20,000
    )Other
    
    
    727
    
    
    
    
    
    
    
    727Net cash used in investing activities
    
    
    (44,040
    )
    
    
    4,898
    
    
    
    (39,142
    )FINANCING ACTIVITIES:Maturity of restricted marketable securities held by trustee for debt services
    
    
    2,865
    
    
    
    
    
    
    
    2,865Cash consideration from issuance of shares under stock plans
    
    
    4,953
    
    
    
    
    
    
    
    4,953Excess tax benefits from stock-based compensation
    
    
    107
    
    
    
    
    
    
    
    107Payments on long-term debt
    
    
    (1,300
    )
    
    
    
    
    
    
    (1,300
    )Net cash provided by financing activities
    
    
    6,625
    
    
    
    
    
    
    
    6,625Decrease in cash and cash equivalents
    
    
    (33,784
    )
    
    
    
    
    
    
    (33,784
    )Cash and cash equivalents at beginning of period
    
    
    51,136
    
    
    
    
    
    
    
    51,136Cash and cash equivalents at end of period
    
    $
    17,352
    
    
    $
    
    
    
    $
    17,352Supplemental disclosure of cash and non-cash information:Cash paid for interest
    
    $
    3,072
    
    
    $
    
    
    
    $
    3,072Cash paid for taxes
    
    
    
    
    
    
    
    
    
    
    
 7




---



##### 



2. Basis of Presentation
  Accounting Policies:
   Consolidation
of Entities:
 Concentration
of Supply Risk:
  Recent
Accounting Pronouncements:
   8




---



##### 



3. Stock Incentive Plans
  Shareholder
    
    
    
    
    
    
    TotalApproved
    
    
    Other
    
    
    For All(in thousands, except exercise price)
    
    Plans
    
    
    Plans
    
    
    PlansShares issuable under outstanding awards
    
    
    10,092
    
    
    
    41
    
    
    
    10,133Shares available for future issuance
    
    
    8,328
    
    
    
    
    
    
    
    8,328Total
    
    
    18,420
    
    
    
    41
    
    
    
    18,461Average exercise price for outstanding options
    
    $
    16.92
    
    
    $
    5.24
    
    
    $
    16.87
 9




---



##### 



Stock OptionsWeighted
    
    
    Weighted
    
    
    Aggregate IntrinsicNumber of
    
    
    Average Exercise
    
    
    Average Remaining
    
    
    Value as of June 30,(in thousands, except share price)
    
    Shares
    
    
    Price
    
    
    Contractual Term
    
    
    2006Outstanding at December 31, 2005
    
    
    10,350
    
    
    $
    16.38Granted
    
    
    337
    
    
    
    18.04Exercised
    
    
    (613
    )
    
    
    6.55Expired
    
    
    (218
    )
    
    
    26.25Forfeited
    
    
    (94
    )
    
    
    11.79Outstanding at June 30, 2006
    
    
    9,762
    
    
    
    16.87
    
    
    
    5.69
    
    
    $
    66,657Ending vested and expected to vest
    
    
    9,695
    
    
    
    16.88
    
    
    
    5.69
    
    
    
    66,263Ending exercisable
    
    
    8,261
    
    
    $
    17.45
    
    
    
    5.49
    
    
    $
    54,779
  Restricted Stock UnitsWeighted
    
    
    Aggregate IntrinsicNumber of
    
    
    Weighted Average Grant
    
    
    Average Remaining
    
    
    Value as of June 30,(in thousands, except share price)
    
    Shares
    
    
    Date Fair Value
    
    
    Contractual Term
    
    
    2006Outstanding at December 31, 2005
    
    
    264
    
    
    $
    24.83Granted
    
    
    119
    
    
    
    17.32Exercised
    
    
    
    
    
    
    Forfeited
    
    
    (12
    )
    
    
    24.59Outstanding at June 30 2006
    
    
    371
    
    
    
    22.43
    
    
    
    1.48
    
    
    $
    7,109Ending vested and expected to vest
    
    
    348
    
    
    $
    22.43
    
    
    
    1.43
    
    
    $
    6,668
    Options
    
    
    OptionsOutstanding
    
    
    ExercisableWeighted
    
    
    Weighted
    
    
    
    
    
    
    WeightedNumber
    
    
    Average
    
    
    Average
    
    
    Number
    
    
    AverageOutstanding
    
    
    Remaining
    
    
    Exercise
    
    
    Exercisable
    
    
    ExerciseRange of Exercise Price
    
    (in thousands)
    
    
    Life
    
    
    Price
    
    
    (in thousands)
    
    
    Price$1.81$3.71
    
    
    1,119
    
    
    
    5.59
    
    
    $
    3.49
    
    
    
    980
    
    
    $
    3.49$3.80$8.08
    
    
    1,199
    
    
    
    5.07
    
    
    
    6.13
    
    
    
    1,101
    
    
    
    6.03$8.15$8.59
    
    
    987
    
    
    
    4.46
    
    
    
    8.37
    
    
    
    949
    
    
    
    8.36$8.88$12.75
    
    
    130
    
    
    
    5.47
    
    
    
    11.03
    
    
    
    112
    
    
    
    11.14$12.79$13.31
    
    
    1,225
    
    
    
    7.01
    
    
    
    13.30
    
    
    
    560
    
    
    
    13.30$13.45$21.72
    
    
    981
    
    
    
    5.69
    
    
    
    17.73
    
    
    
    524
    
    
    
    17.96$21.77$24.11
    
    
    976
    
    
    
    6.06
    
    
    
    23.14
    
    
    
    890
    
    
    
    23.10$24.18$26.91
    
    
    1,142
    
    
    
    5.94
    
    
    
    26.49
    
    
    
    1,142
    
    
    
    26.49$26.99$27.43
    
    
    213
    
    
    
    5.44
    
    
    
    27.27
    
    
    
    213
    
    
    
    27.27$27.86$33.22
    
    
    1,790
    
    
    
    5.64
    
    
    
    28.73
    
    
    
    1,790
    
    
    
    28.73Total
    
    
    9,762
    
    
    
    5.69
    
    
    $
    16.87
    
    
    
    8,261
    
    
    $
    17.45
 10




---



##### 



For the three months endedJune 30,(in thousands, except per share data)
    
    2006
    
    
    2005Amounts charged against earnings (loss), before income tax benefits
    
    $
    1,935
    
    
    $
    837Amount of income tax expense recognized in earnings (loss)
    
    
    
    
    
    
    60Amount charged against net earnings (loss)
    
    $
    1,935
    
    
    $
    897Impact on net earnings (loss) per common share:Basic
    
    $
    0.02
    
    
    $
    0.01Diluted
    
    $
    0.02
    
    
    $
    0.01
 For the six months endedJune 30,(in thousands, except per share data)
    
    2006
    
    
    2005Amounts charged against earnings (loss), before income tax benefits
    
    $
    3,886
    
    
    $
    1,940Amount of income tax expense recognized in earnings (loss)
    
    
    107
    
    
    
    190Amount charged against net earnings (loss)
    
    $
    3,993
    
    
    $
    2,130Impact on net earnings (loss) per common share:Basic
    
    $
    0.05
    
    
    $
    0.03Diluted
    
    $
    0.05
    
    
    $
    0.03
   Three months endedJune 30, 2006Selling, general, and administrative
    
    $
    1,341Research and development
    
    
    594Total
    
    $
    1,935
 Six months endedJune 30, 2006Selling, general, and administrative
    
    $
    2,823Research and development
    
    
    1,063Total
    
    $
    3,886
  Expected dividend yield
    
    
    0
    %Risk-free interest rate
    
    
    4.92
    %Expected volatility
    
    
    0.42Expected life, in years
    
    
    5.89
 11




---



##### 



Three months ended
    
    
    Six months ended(in thousands, except per share data)
    
    June 30, 2005
    
    
    June 30, 2005Net income, as reported
    
    $
    12,708
    
    
    $
    24,308Add: Total stock-based employee compensation expense included in reported net income
    
    
    897
    
    
    
    2,130Deduct: Total stock-based employee compensation expense determined under fair value
based method for all awards
    
    
    (8,411
    )
    
    
    (17,832
    )Pro forma net income
    
    $
    5,194
    
    
    $
    8,606Net income per common share:As reported basic
    
    $
    0.18
    
    
    $
    0.34Pro forma basic
    
    $
    0.07
    
    
    $
    0.12As reported diluted
    
    $
    0.17
    
    
    $
    0.32Pro forma diluted
    
    $
    0.07
    
    
    $
    0.11Expected dividend yield
    
    
    0
    %
    
    
    0
    %Risk-free interest rate
    
    
    3.87
    %
    
    
    3.87
    %Annualized volatility
    
    
    0.67
    
    
    
    0.72Expected life, in years
    
    
    4.8
    
    
    
    5.1
  4. Net Income (Loss) Per Common Share
  Three MonthsEnded June 30,(in thousands)
    
    2006
    
    
    2005Weighted-average shares  basic
    
    
    78,210
    
    
    
    71,768Effect of dilutive stock options
    
    
    
    
    
    
    3,935Effect of convertible debt
    
    
    
    
    
    
    Weighted-average shares  assuming dilution
    
    
    78,210
    
    
    
    75,703
 Six MonthsEnded June 30,(in thousands)
    
    2006
    
    
    2005Weighted-average shares  basic
    
    
    78,000
    
    
    
    71,558Effect of dilutive stock options
    
    
    
    
    
    
    4,133Effect of convertible debt
    
    
    
    
    
    
    Weighted-average shares  assuming dilution
    
    
    78,000
    
    
    
    75,691
  5. Marketable Investments
  12




---



##### 



June 30,
    
    
    December 31,(in thousands)
    
    2006
    
    
    2005Corporate notes (classified as held-to-maturity)
    
    $
    
    
    
    $
    4,000Government agencies (classified as held-to-maturity)
    
    
    
    
    
    
    33,347Auction rate securities (classified as available-for-sale)
    
    
    73,751
    
    
    
    15,720Total
    
    $
    73,751
    
    
    $
    53,067
  June 30,
    
    
    December 31,(in thousands)
    
    2006
    
    
    2005Equity securities (classified as available-for-sale)
    
    $
    20,330
    
    
    $
    23,952Total
    
    $
    20,330
    
    
    $
    23,952
     June 30, 2006Gross
    
    GrossUnrealized
    
    Unrealized
    
    Fair(in thousands)
    
    Cost
    
    Gains
    
    Losses
    
    ValueEquity Securities (classified as available for sale)
    
    $
    18,166
    
    
    $
    2,164
    
    
    $
    
    
    
    $
    20,330
 December 31, 2005Gross
    
    GrossUnrealized
    
    Unrealized
    
    Fair(in thousands)
    
    Cost
    
    Gains
    
    Losses
    
    ValueEquity Securities (classified as available for sale)
    
    $
    28,046
    
    
    $
    106
    
    
    $
    (4,200
    )
    
    $
    23,952
 6. Inventories
  June 30,
    
    December 31,(in thousands)
    
    2006
    
    2005Raw materials and supplies
    
    $
    680
    
    
    $
    472Work in process
    
    
    706
    
    
    
    1,274Finished products
    
    
    37,832
    
    
    
    47,450Inventory on consignment
    
    
    195
    
    
    
    196Total
    
    $
    39,413
    
    
    $
    49,392
  13




---



##### 



7. Accrued Expenses
  June 30,
    
    
    December 31,(in thousands)
    
    2006
    
    
    2005Product rebate, administrative, and other fees
    
    $
    13,784
    
    
    $
    11,886Product development
    
    
    9,039
    
    
    
    9,152License fees
    
    
    6,864
    
    
    
    5,847Vacation
    
    
    3,272
    
    
    
    2,295Other bonuses
    
    
    3,053
    
    
    
    6,007Interest
    
    
    2,452
    
    
    
    2,189Field sales bonuses
    
    
    2,180
    
    
    
    1,306Marketing
    
    
    1,701
    
    
    
    648Payroll benefits
    
    
    1,555
    
    
    
    1,497Product return
    
    
    1,470
    
    
    
    1,684Retirement plan
    
    
    869
    
    
    
    3,088Other
    
    
    5,131
    
    
    
    8,451Total
    
    $
    51,370
    
    
    $
    54,050
 8. Acquisitions
  Purchase Price:
 (In thousands)Purchase of Guilford  cash consideration
    
    $
    53,888Purchase of Guilford  equity consideration
    
    
    122,246Extinguishment of Guilfords revenue interest obligation agreement with Paul Royalty Fund, L.P. and Paul Royalty Fund, II, L.P.
    
    
    59,891Repurchase of Guilfords convertible debt
    
    
    69,249Transaction costs and fees
    
    
    15,569Purchase price
    
    $
    320,843
  ®
 14




---



##### 



(In thousands)Cash and cash equivalents
    
    $
    19,500Short-term marketable investments
    
    
    2,978Restricted marketable investments
    
    
    15,930Investments held by SNDC
    
    
    21,262Receivables, net
    
    
    4,328Inventories
    
    
    7,957Other current assets
    
    
    1,394Goodwill
    
    
    66,183In-process research and development
    
    
    156,900Acquired identifiable intangible assets
    
    
    70,610Equipment, furniture, and leasehold improvements, net
    
    
    1,768Other assets
    
    
    2,810Accounts payable
    
    
    (7,072
    )Accrued expenses
    
    
    (15,548
    )Long-term debt
    
    
    (3,757
    )Other liabilities
    
    
    (6,366
    )Minority interest
    
    
    (18,034
    )Total purchase price
    
    $
    320,843
  (in thousands)Gliadel Wafer
    
    $
    62,300Aggrastat Injection
    
    
    8,310Total acquired identifiable intangible assets
    
    $
    70,610
  Pro forma results of operations:
 Three months ended
    
    Six months ended(in thousands)
    
    June 30, 2005
    
    June 30, 2005Total revenues
    
    $
    79,927
    
    
    $
    153,898Net loss
    
    
    (5,391
    )
    
    
    (15,919
    )Pro forma loss per common share:Basic and diluted
    
    $
    (0.07
    )
    
    $
    (0.21
    )
 9. Stockholders Equity
  Additional
    
    
    
    
    
    
    Accumulated otherCommon Stock
    
    
    paid-in
    
    
    Unearned
    
    
    comprehensive(in thousands)
    
    Shares
    
    
    Par value
    
    
    capital
    
    
    compensation
    
    
    income (loss)Balance at December 31, 2005
    
    
    77,584
    
    
    $
    776
    
    
    $
    557,841
    
    
    $
    (6,013
    )
    
    $
    (4,098
    )Exercise of stock options, including income tax
benefit of $107
    
    
    613
    
    
    
    6
    
    
    
    4,116
    
    
    
    
    
    
    
    Employee retirement plan contribution
    
    
    141
    
    
    
    1
    
    
    
    2,440
    
    
    
    
    
    
    
    Shares issued pursuant to employee stock purchase plan
    
    
    57
    
    
    
    1
    
    
    
    937
    
    
    
    
    
    
    
    Restricted stock, net of shares withheld for tax
    
    
    15
    
    
    
    
    
    
    
    306
    
    
    
    1,758
    
    
    
    Employee stock option compensation expense
    
    
    
    
    
    
    
    
    
    
    1,822
    
    
    
    
    
    
    
    Unrealized
gain and recognition of other-than-temporary impairment
on available for sale investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,262Other issuances
    
    
    4
    
    
    
    
    
    
    
    340
    
    
    
    
    
    
    
    Balance at June 30, 2006
    
    
    78,414
    
    
    $
    784
    
    
    $
    567,802
    
    
    $
    (4,255
    )
    
    $
    2,164
 15




---



##### 



10. Research and Development Expense
  Three Months Ended June 30,(in thousands)
    
    2006
    
    
    2005License fees
    
    $
    50
    
    
    $
    Other research and development
    
    
    28,142
    
    
    
    14,248Total
    
    $
    28,192
    
    
    $
    14,248
 Six Months Ended June 30,(in thousands)
    
    2006
    
    
    2005License fees
    
    $
    50
    
    
    $
    Other research and development
    
    
    51,107
    
    
    
    24,701Total
    
    $
    51,157
    
    
    $
    24,701
 11. Comprehensive Income (Loss)
  Three Months Ended June 30,(in thousands)
    
    2006
    
    
    2005Net income (loss), as reported
    
    $
    (19,435
    )
    
    $
    12,708Unrealized
gain (loss) and recognition of other-than-temporary impairment from
securities classified as available for
sale
    
    
    351
    
    
    
    (820
    )Foreign currency translation adjustment
    
    
    3
    
    
    
    Comprehensive income
    
    $
    (19,081
    )
    
    $
    11,888
 Six Months Ended June 30,(in thousands)
    
    2006
    
    
    2005Net income (loss), as reported
    
    $
    (22,243
    )
    
    $
    24,308Unrealized
gain (loss) and recognition of other-than-temporary impairment from
securities classified as available for
sale
    
    
    6,259
    
    
    
    (9,262
    )Foreign currency translation adjustment
    
    
    3
    
    
    
    Comprehensive income
    
    $
    (15,981
    )
    
    $
    15,046
 12. Licensing Arrangements
 Dacogen Injection
  16




---



##### 



13. Goodwill
  (in thousands)Balance at December 31, 2005
    
    $
    70,203Valuation of Baxter loss contract
    
    
    (723
    )Valuation of inventory
    
    
    (991
    )Adjustments of other miscellaneous liabilities and receivables
    
    
    (746
    )Valuation of Aggrastat Injection intangible asset
    
    
    (1,560
    )Balance at June 30, 2006
    
    $
    66,183
 14. Subsequent Events
 
 17




---



##### 



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 (HPV E6 E7
plasmid) (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, 2005, 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 Aggrastat
®, as trademarks
with the U.S. Patent and Trademark Office, and own pending trademark applications for the marks
Saforis and UpTec. 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.
 Managements Discussion and Analysis of Financial Condition and Results of Operations
 Restatement
  Business Overview 
    MARKETABLE PRODUCTS
 Products
    
    Principal Indications
    
    Status
    
    Commercial RightsAloxi Injection
    
    CINV
    
    Currently marketed
    
    U.S. & Canada: MGI PHARMADacogen for Injection
    
    MDS
    
    Currently marketed
    
    U.S. & Canada: MGI PHARMA
Rest of World: Cilag GmbHGliadel Wafer
    
    Malignant glioma at time of initial surgery
    
    Currently marketed
    
    U.S.: MGI PHARMA
Outside U.S.: Various collaborators
 18




---



##### 



Products
    
    Principal Indications
    
    Status
    
    Commercial RightsGBM
    
    Currently marketed
    
    U.S.: MGI PHARMA
Outside U.S.: Various collaboratorsSalagen 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 PHARMAOutside U.S.: Various collaboratorsAggrastat Injection
    
    Acute coronary syndrome
    
    Currently marketed
    
    U.S.: MGI PHARMA
  PRODUCT CANDIDATES AND RESEARCH PIPELINE
 Products
    
    Principal Indications
    
    Status
    
    SponsorDacogen for Injection
    
    AML
    
    Phase 2 & 3
    
    MGI PHARMASaforis Powder for Oral Suspension
    
    Oral mucositis
    
    October 12, 2006 PDUFA
goal date
    
    MGI PHARMAamolimogene (HPV E6 E7 plasmid) (formerly known as ZYC101a)
    
    Cervical dysplasia
    
    Pivotal program ongoing
    
    MGI PHARMAAloxi Injection
    
    PONV
    
    Phase 3
    
    Helsinn HealthcareAquavan Injection
    
    Minimal to moderate sedation of
patients undergoing brief
diagnostic or surgical procedures
    
    Phase 3
    
    MGI PHARMAAloxi Capsules
    
    CINV
    
    Phase 3
    
    Helsinn Healthcareirofulven
    
    Hormone refractory prostate cancer
Liver cancer, inoperable
Combination with oxaliplatin
    
    Phase 2
Phase 2
Phase 2
    
    MGI PHARMA
MGI PHARMA
MGI PHARMAZYC300
    
    Solid tumors
    
    Phase 1/2
    
    MGI PHARMAGCP II Inhibitors
    
    Chemotherapy induced neuropathy
    
    Preclinical
    
    MGI PHARMAPARP Inhibitors
    
    Cancer chemosensitization and
radiosensitization
    
    Preclinical
    
    MGI PHARMAMG98
    
    Renal cell cancer
    
    Phase 2
    
    MethylGeneOther acylfulvene analogs
    
    Various Cancers
    
    Preclinical
    
    MGI PHARMA
    19




---



##### 



Results of Operations
  Revenues
  Three Months Ended June 30,(in thousands)
    
    2006
    
    
    2005
    
    
    Change
    
    
    % ChangeProduct sales:Aloxi Injection
    
    $
    67,438
    
    
    $
    60,755
    
    
    $
    6,683
    
    
    
    11
    %Gliadel Wafer
    
    
    8,427
    
    
    
    
    
    
    
    8,427
    
    
    
    Salagen Tablets
    
    
    1,637
    
    
    
    3,339
    
    
    
    (1,702
    )
    
    
    (51
    )Hexalen Capsules
    
    
    720
    
    
    
    640
    
    
    
    80
    
    
    
    13Aggrastat Injection
    
    
    2,497
    
    
    
    
    
    
    
    2,497
    
    
    
    Dacogen
    
    
    5,217
    
    
    
    
    
    
    
    5,217
    
    
    
    Other
    
    
    254
    
    
    
    584
    
    
    
    (330
    )
    
    
    (57
    )Total product sales
    
    
    86,190
    
    
    
    65,318
    
    
    
    20,872
    
    
    
    32Licensing and other
    
    
    963
    
    
    
    1,844
    
    
    
    (881
    )
    
    
    (48
    )Total revenues
    
    $
    87,153
    
    
    $
    67,162
    
    
    $
    19,991
    
    
    
    30
 20




---



##### 



Six Months Ended June 30,(in thousands)
    
    2006
    
    
    2005
    
    
    Change
    
    
    % ChangeProduct sales:Aloxi Injection
    
    $
    130,738
    
    
    $
    117,909
    
    
    $
    12,829
    
    
    
    11
    %Gliadel Wafer
    
    
    18,091
    
    
    
    
    
    
    
    18,091
    
    
    
    Salagen Tablets
    
    
    3,022
    
    
    
    6,972
    
    
    
    (3,950
    )
    
    
    (57
    )Hexalen Capsules
    
    
    1,440
    
    
    
    1,206
    
    
    
    234
    
    
    
    19Aggrastat Injection
    
    
    4,877
    
    
    
    
    
    
    
    4,877
    
    
    
    Dacogen
    
    
    5,217
    
    
    
    
    
    
    
    5,217
    
    
    
    Other
    
    
    330
    
    
    
    1,616
    
    
    
    (1,286
    )
    
    
    (80
    )Total product sales
    
    
    163,715
    
    
    
    127,703
    
    
    
    36,012
    
    
    
    28Licensing and other
    
    
    1,641
    
    
    
    2,694
    
    
    
    (1,053
    )
    
    
    (39
    )Total revenues
    
    $
    165,356
    
    
    $
    130,397
    
    
    $
    34,959
    
    
    
    27
 Product Sales:
 
    
    Aloxi net sales revenue was $67.4 million, or 78 percent, and $130.7 million, or 80
percent of our product sales revenue for the three and six months ended June 30, 2006,
respectively. This compares with Aloxi net sales revenue of $60.8 million, or 93 percent,
and $117.9 million, or 92 percent, of our product sales revenue for the three and six
months ended June 30, 2005.
    
    Gliadel net sales revenue was $8.4 million, or 10 percent, and $18.1 million, or 11
percent of our product sales revenue for the three and six months ended June 30, 2006
respectively. Because Gliadel was a product we acquired in our purchase of Guilford during
the fourth quarter of 2005, we had no comparable sales for the three and six months ended
June 30, 2005.
    
    Dacogen net sales revenue was $5.2 million for the three and six months ended June 30,
2006 and represented 6 percent of our product sales revenue for the three months ended June
30, 2006 and 3 percent of our product sales revenue for the six months ended June 30, 2006.
We began our commercial launch of Dacogen during the second quarter of 2006.
    
    Salagen net sales continued to decline from historical levels. Salagen net sales
revenue was $1.6 million, or 2 percent, and $3.0 million, or 2 percent of our product sales
revenue for the three and six months ended June 30, 2006. This compares with Salagen net
sales revenue of $3.3 million, or 5 percent, and $7.0 million, or 5 percent of our product
sales revenue for the three and six months ended June 30, 2005. This decline began as a
result of the FDA approval of a competitors Abbreviated New Drug Application (ANDA) for
a generic 5 milligram pilocarpine hydrochloride tablet in December 2004. Since then, three
additional ANDAs have been approved by the FDA, two of which were approved in 2005 and an
additional ANDA approved in 2006 that included the approval of the first generic 7.5
milligram pilocarpine hydrochloride tablet. We suspended promotion of Salagen in 2005.
  Licensing and other:
 Costs and Expenses
 Three Months Ended June 30,(in thousands)
    
    2006
    
    
    2005
    
    
    Change
    
    
    % ChangeCosts and expenses:Cost of sales
    
    $
    33,813
    
    
    $
    22,920
    
    
    $
    10,893
    
    
    
    48
    %Selling, general and administrative
    
    
    35,463
    
    
    
    16,974
    
    
    
    18,489
    
    
    
    109Research and development
    
    
    28,192
    
    
    
    14,248
    
    
    
    13,944
    
    
    
    98Total
    
    $
    97,468
    
    
    $
    54,142
    
    
    $
    43,326
    
    
    
    80
 21




---



##### 



Six Months Ended June 30,(in thousands)
    
    2006
    
    
    2005
    
    
    Change
    
    
    % ChangeCosts and expenses:Cost of sales
    
    $
    62,155
    
    
    $
    44,836
    
    
    $
    17,319
    
    
    
    39
    %Selling, general and administrative
    
    
    66,985
    
    
    
    35,591
    
    
    
    31,394
    
    
    
    88Research and development
    
    
    51,157
    
    
    
    24,701
    
    
    
    26,456
    
    
    
    107Total
    
    $
    180,297
    
    
    $
    105,128
    
    
    $
    75,169
    
    
    
    72
 Cost of sales:
 Selling, general and administrative:
 Research and development:
 Interest Income and Expense and Other Income
 Three Months Ended June 30,(in thousands)
    
    2006
    
    
    2005
    
    
    Change
    
    
    % ChangeInterest income
    
    $
    1,361
    
    
    $
    1,747
    
    
    $
    (386
    )
    
    
    (22
    )%Interest expense
    
    
    (1,925
    )
    
    
    (1,754
    )
    
    
    (171
    )
    
    
    10Impairment of investment
    
    
    (9,880
    )
    
    
    
    
    
    
    (9,880
    )
    
    
    Other (expense)
    
    
    (126
    )
    
    
    
    
    
    
    (126
    )
    
    
    Total
    
    $
    (10,570
    )
    
    $
    (7
    )
    
    $
    (10,563
    )
    
    NM*
 
 *
    
    Not Meaningful Six Months Ended June 30,(in thousands)
    
    2006
    
    
    2005
    
    
    Change
    
    
    % ChangeInterest income
    
    $
    2,517
    
    
    $
    3,104
    
    
    $
    (587
    )
    
    
    (19
    )%Interest expense
    
    
    (3,922
    )
    
    
    (3,510
    )
    
    
    (412
    )
    
    
    12Impairment of investment
    
    
    (9,880
    )
    
    
    
    
    
    
    (9,880
    )
    
    
    Other income
    
    
    55
    
    
    
    
    
    
    
    55
    
    
    
    Total
    
    $
    (11,230
    )
    
    $
    (406
    )
    
    $
    (10,824
    )
    
    NM*
 
 *
    
    Not Meaningful Interest Income
 Interest Expense
 22




---



##### 



Impairment
of Investment:
 Other income (expense):
 Provision for Income Taxes
  Net (Loss) Income
  Liquidity and Capital Resources
   Activities of SNDC
   Net
Cash Used in Operating Activities
  Net Cash Provided by (Used in) Investing Activities
  23




---



##### 



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, Gliadel, Dacogen, 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;
    
    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.
  24




---



##### 



Payment Obligations
  Remainder of(in thousands)
    
    2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    Thereafter
    
    
    TotalOperating lease payments
    
    $
    2,751
    
    
    $
    5,606
    
    
    $
    4,810
    
    
    $
    4,307
    
    
    $
    3,832
    
    
    $
    29,661
    
    
    $
    50,967Capital lease payments
    
    
    258
    
    
    
    94
    
    
    
    37
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    389Baxter loss contract (a)
    
    
    1,459
    
    
    
    1,459
    
    
    
    1,459
    
    
    
    1,459
    
    
    
    
    
    
    
    
    
    
    
    5,836Other long term debt
    
    
    36
    
    
    
    63
    
    
    
    64
    
    
    
    66
    
    
    
    
    
    
    
    
    
    
    
    229Convertible debt
    
    
    2,964
    
    
    
    5,929
    
    
    
    7,429
    
    
    
    5,854
    
    
    
    5,854
    
    
    
    350,927
    
    
    
    378,957Helsinn minimum sales obligation (b)
    
    
    
    
    
    
    6,123
    
    
    
    5,559
    
    
    
    4,801
    
    
    
    4,052
    
    
    
    6,241
    
    
    
    26,776Total
    
    $
    7,468
    
    
    $
    19,274
    
    
    $
    19,358
    
    
    $
    16,487
    
    
    $
    13,738
    
    
    $
    386,829
    
    
    $
    463,154
 
 (a)
    
    In the acquisition of Guilford, MGI assumed obligations under a supply
agreement with Baxter Healthcare Corporation for Aggrastat 250 ml and
100 ml bags through July 2009. As of June 30, 2006, the Company has
committed to purchasing approximately $5.8 million, of which
approximately $1.5 million will be incurred during the remainder of
2006.(b)
    
    In connection with the April 2001 in-licensing agreement with Helsinn
Healthcare SA where we obtained the exclusive U.S. and Canadian
oncology license and distribution rights for Aloxi, we agreed to pay
minimum payments over the first ten years following commercialization.
The minimum is only payable to the extent that it exceeds the actual
payments that would otherwise be payable under the agreement. Minimum
sales targets of Aloxi for prevention of CINV peak at approximately
$90 million in the fourth year of commercialization.  Off Balance Sheet Arrangements
  Impact of Recently Issued Accounting Standards
   25




---



##### 



Application of Critical Accounting Policies and Estimates
 Stock-based Compensation:
  26




---



##### 



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) inJune 30, 2006
    
    Change
    
    Hypothetical Price Change
    
    Stockholders EquityEquity Securities
    
    $
    20,330
    
    
    
    10
    %
    
    $
    2,033
    
    
    
    1.9
    %(10
    )%
    
    
    (2,033
    )
    
    
    (1.9
    )%20
    %
    
    
    4,066
    
    
    
    3.9
    %(20
    )%
    
    
    (4,066
    )
    
    
    (3.9
    )%30
    %
    
    
    6,099
    
    
    
    5.8
    %(30
    )%
    
    
    (6,099
    )
    
    
    (5.8
    )%
 Item 4.
 Controls and Procedures
     27




---



##### 



PART II  OTHER INFORMATION
 Item 1A. Risk Factors
  Sales of Aloxi injection (Aloxi) account for a significant portion of our product revenues. Our
business is dependent on the commercial success of Aloxi. If any factor adversely affects sales of
Aloxi, we may be unable to continue our operations as planned.
   3
   If the third-party manufacturer of Aloxi, Dacogen, Salagen, or Aggrastat or any of our other
products ceases operations or fails to comply with applicable manufacturing regulations, we may not
be able to meet customer demand in a timely manner, if at all.
    28




---



##### 




    
    marketing or manufacturing delays;
    
    warning letters;
    
    fines;
    
    product recalls or seizures;
    
    injunctions;
    
    refusal of the FDA to review pending market approval applications or
supplements to approval applications;
    
    total or partial suspension of production;
    
    civil penalties;
    
    withdrawals of previously approved marketing applications; or
    
    criminal prosecutions.
 If we fail to compete successfully with our competitors, our product revenues could decrease and
our stock price could decline.
 3
  We rely on multinational and foreign pharmaceutical companies to develop and commercialize our
products and product candidates in markets outside the United States.
   
    
    the achievement of milestones by us or our collaborators;
    
    the amount of product sales and royalty-generating activities;
 29




---



##### 




    
    the timing of initiating additional licensing relationships; and
    
    our continuing obligation related to license payments.
  Item 4. Submission of Matters to a Vote of Security Holders
   Nominee
    
    For
    
    WithheldAndrew J. Ferrara
    
    
    64,215,187
    
    
    
    3,775,011Edward W. Mehrer
    
    
    67,604,258
    
    
    
    385,940Hugh E. Miller
    
    
    63,890,862
    
    
    
    4,099,336Dean J. Mitchell
    
    
    66,914,469
    
    
    
    1,075,729Leon O. Moulder, Jr.
    
    
    67,277,461
    
    
    
    712,737David B. Sharrock
    
    
    67,544,636
    
    
    
    445,562Waneta C. Tuttle, Ph. D.
    
    
    64,215,807
    
    
    
    3,774,391Arthur L. Weaver, M.D.
    
    
    64,203,161
    
    
    
    3,787,037
  For
    
    Against
    
    Abstain
    
    Broker Non-Vote42,090,906
    
    12,641,110
    
    133,818
    
    13,124,364
  For
    
    Against
    
    Abstain
    
    Broker Non-Vote67,531,520
    
    408,748
    
    49,930
    
    
 Item 6. Exhibits
 ExhibitNo.
    
    Description10.1
    
    Termination Agreement between MGI PHARMA, INC. and William F. Spengler dated April 21, 2006 (incorporated by
reference to Exhibit 10.1 to the Companys Form 8-K filed April 27, 2006 (File No. 0-10736).10.2
    
    Severance Agreement and General Release between MGI PHARMA, Inc. and James Hawley (incorporated by reference to
Exhibit 10.2 to the Companys Form 8-K filed April 27, 2006 (File No. 0-10736).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.
 30




---



##### 



SIGNATURES
  MGI PHARMA, INC.Date: March 1, 2007
    By:
    /s/ William F. SpenglerWilliam F. SpenglerExecutive Vice President and Chief Financial Officer
(principal financial officer, and duly authorized officer) 31