from www.techstock.com ::::
Feb 26, 1999
Warner Lambert
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Scott Schuppie of Grace Equity Management provides the following stock
idea on Warner Lambert (WLA 67 1/4). Below is the write up.
Warner Lambert essentially has three divisions; consumer healthcare (which
makes Sudafed, Rolaids and Listerene), confectionery (Halls, Certs and
Dentene) and the pharmaceutical area that develops and distributes drugs. "The
bulk of Warners' profits come from their pharmaceutical division," says Scott
Schuppie President of Grace Equity Management (which was up 64% in 98).
"Warner is undergoing a change in management and I think they will eventually
sell or spin-off their consumer healthcare and confectionery businesses. We
would view that as a major positive."
Warner recently announced that they would acquire Agouron for $2.1 billion
in stock. Schuppie views this acquisition as positive because Agouron is one
of the few biotech companies that are profitable. Their primary product is
Viracept. "It is the number one protease inhibitor against HIV and will
immediately make Warner the leader in that area and increase their bottom
line," says Schuppie.
He is looking for the stock to be in the $100 to $110 range by late 99'
Schuppie notes that a dark cloud has been looming over Warner. One of their
drugs, Rezulin, which is used in the treatment of Type II Diabetes, is being
reviewed by the FDA. Of 1.4 million prescriptions for Rezulin, 33 people that were
using the drug have died. Scott adds that when Eli Lilly introduced Prozac,
there was a similar occurrence and a small number of people were badly effected
by the drug. The FDA reviewed Prozac but did not call for any more clinical trials.
He thinks that when the FDA reviews Rezulin they will not call for more clinical
trials because only a small number of people were affected, relative to the people
that use the drug. He estimates that Rezulin should generate revenues of $780
million in 99'.
Warner currently has compounds in development for prostate cancer, arthritis,
Alzheimer's, and the very promising new YMO87 for congestive heart failure.
They are coming to market with a new drug called Celexa which should add
another nice revenue stream to the company. Lipitor, Warner's blockbuster
cholesterol drug will remain the main driver for the company. Lipitor had $2.2
billion in revenues in 98' and Schuppie predicts that number to grow to around
$3 billion in 99'. He rates the stock a buy and estimates they should earn $1.96
in 99' and $2.39 in 00'. He is looking for the stock to be in the $100 to $110 range
by late 99', early 00'. |
