Nice article on Sepracor-
Magic 25
Jun 23, 1999
J&J Withdraws Allergy Drug Hismanal
Earlier this week, Johnson & Johnson (NYSE:JNJ - news) withdrew its allergy drug, Hismanal, from the market after safety-related restrictions hurt sales. In 1998, the FDA added warnings to Hismanal's label, which concerned bad drug interactions with other prescribed medications. Sales began falling in 1997, to $180 million, and fell further, to $90 million, in 1998.
The action came about one month after J&J decided to end its agreement with Sepracor to co-promote an experimental, modified version of Hismanal called norastemizole, a version that Sepracor continues to develop.
According to Sergio Traversa of Mehta Partners, the effect of the decision, while minimal upon J&J, benefits Sepracor. For one thing, neither dropping Hismanal, nor ending the co-promotion agreement, hurts Sepracor. For another, the effect of the decision is to "get rid of the clouds around norastemiziole."
And neither decision, it seems, reflects any doubts about the quality of the new drug. As Doug Lind of Morgan Stanley has written, "data…show that norastemizole has an equivalent safety and efficacy profile to market leader Claritin, but has a faster onset of action," noting that, ongoing trials for the drug candidate should be complete by year-end 1999.
In short, Sepracor comes away from this negative-seeming press with a very strong allergy product that is close to the end-stage of development. But norastemizole is just one product in the company's robust pipeline.
Also, as Lind notes, many of the issues surrounding Sepracor recently seem likely to be favorably resolved. The ongoing FTC review of Sepracor's licensing deal with Eli Lilly (NUSE: LLY) for ®-fluoxetine to replace Prozac is seen by some as indicating that antitrust issues will block the deal. On Lind's view, that will not happen, for three reasons. One, a form of generic Prozac will enter the market, two, because Prozac is not a monopoly, since its growth is decelerating in the market, and three, because Claritin metabolite desloratatadine, which came closer to being a monopoly, was both reviewed and approved by the FTC.
Another disappearing cloud is the FDA DDMAC (Division of Drug Marketing, Advertising, and Communication) letters on Xopenex. The letters critique the use of misleading information in Sepracor's press releases. As Lind notes, such letters are routine. Drug companies aim high in their use of language then scale back when directed to do so. This year alone, DDMAC issued letters to Eli Lilly for Evista, and Pfizer (NYSE:PFE - news) for Cardura, among many, many others.
In short, though worries concerning Sepracor have been overdone, they have driven share prices to the $70 level from $140. Lind thinks this introduces "an extremely attractive buying opportunity," and is maintaining his target price of $150 per share over the next 12 months. The bottom line is that, at current levels, shares are a terrific value.
Analyst: Bob Hirschfeld
Updated June 23,1999 with Sepracor trading at $76.50 per share
Recommended 11/16/98 at $70.75 |
