Thanks, Erik, I've been asleep at the switch.
NPS Pharmaceuticals Inc. (NPSP;
$30.90; C-1-9)
Raising Target to $46 Based on Increased Confidence in
Preos (Comment Available)
Volatility Risk: High
03E d$3.55; 04E d$2.92; Market Cap.: $1,119mn
• We are raising our price target from $37 to $46 based
on greater confidence in Preos for osteoporosis. Our
increased confidence in Preos reflects strong Forteo
sales trends and data expected to be released during
the weekend. We believe that yesterday’s weakness
due to concerns about the Cinacalcet launch expected
in 2H04 created an opportunity to buy the stock in
front of multiple catalysts during the next 6 – 9
months.
• We believe that investors have ignored recent sales
strength of Eli Lilly’s Forteo, which is an osteoporosis
drug of the same class as NPS’s Preos. Forteo sales
trends indicate a major market opportunity for Preos.
According to NDC prescription data, Forteo has
reached sales of $1.7 MM on a weekly basis, which
translates into an annual run rate of $87 MM just 9
months into the launch, despite marketing restrictions
placed on the company by the FDA. In addition, a
recent increase in prescriptions written by internal
medicine doctors suggests broader use than expected.
• Clinical data to be presented at ASBMR this weekend
will highlight the drug’s efficacy versus Fosamax.
We expect the data to suggest that Preos is as good or
better at building new bone and increasing bone
strength in all areas of the body although we believe
that daily injections will limit its use versus Fosamax.
Importantly, we believe that the data can be
extrapolated to suggest a higher likelihood of success
in the phase III study from which we expect data in
late 1Q04.
• Yesterday, investors were concerned that Cinacalcet’s
launch would be slow due to reimbursement issues
and use of Vitamin D at dialysis centers, which may
reduce need for the drug. Although we agree that the
launch will require reimbursement before widespread
use occurs, we do not expect Vitamin D usage to limit
use of Cincalcet since most patients optimized on
Vitamin D still do not attain PTH levels suggested by
K-DOQI guidelines. Phase III data at ASN will likely
support this point.
• Important near-term catalysts include Preos data from
the 1st year of the PaTH study and Cinacalcet data in
PHPT and parathyroid carcinoma in Sept. at ASBMR,
phase III data for Cinacalcet in SHPT in Nov. at ASN,
phase II data released for ALX-0600 in Short Bowel
Syndrome in 2H03, data from the Preos rat
carcinogenicity study in Nov. and a Preos BLA filing
by mid-2004.
• We have increased our target to $46 based on a higher
probability of success for Preos. Our value for Preos
reflects peak sales of $500 MM and an assumed
success rate of 70%. Risks for the stock include
clinical trial failures and the fact that Eli Lilly is about
30 months ahead of NPS with the launch of Forteo.
Amgen also has full control over the development of
Cinacalcet.
(E. Ende/T. McGahren/G. Cohen) |
