BofA...
Sepracor (SEPR, 26.37, Buy, tp40, cap3b): 3Q07 EPS of $0.37, versus our $0.27 expectation, surprised investors. SEPR should continue its earnings upside trend, and we are raising our 2008 EPS estimate to$2.45, from $2.20, and our target price to $40 from $39.Lunesta’s sales ($160M vs $146M) beat our forecast. More importantly, implied cost per prescription increased (to $95 from $80) for the first time since the launch of the drug, which bodes well for future growth post the Ambien generic launch.SEPR has committed to an initial plan to cut $90M-$100M from its sales force and marketing spend in 2008. Given the limited guidance for 2008, it is difficult to precisely pinpoint where this spend is coming from, but is a catalyst for further earnings upside. We believe early 2008 catalysts could come from SEPR putting to work some of its $900 million in cash through product in-licensing to fill the launch gap between now and 2012. Our price target of $40 assumes a CAP of 10 years in our DCF model and implies a 16 times multiple on our 2008 estimate. |
