Sepracor CFO Addresses NY Society of Security Analysts; Buyÿ(7/24)
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On July 23, Sepracor (NASDAQ: SEPR) CFO David Southwell presented his company at a meeting of the New York Society of Security Analysts. Southwell told the gathering that, despite the recent run-up in Sepracor's share price, there had been no insider selling and that "there was considerable value still to be recognized." We agree on the "considerable" part.
ICE Strategy
In his remarks, Southwell focused on the company's basic ICE, or Improved Chemical Entity, strategy, which works at taking already-successful drugs and removing the harmful side effects while improving efficacy. That basic strategy, he said, reduces risks generally associated with drug development, and generally receives better regulatory treatment by the FDA. The strategy also brings with it such rewards as patent protection and virtually guaranteed market share.
Southwell discussed SEPR's strategy in allergy treatment, which has been to improve every drug in the sector. Those drugs include Johnson & Johnson's (NYSE: JNJ) Hismanal, now in Phase III trials as norastemizole, Pfizer's (NYSE: PFE) Zyrtec, now in preclinical trials as certirizine, and Schering- Plough's (NYSE: SGP) $1.7 billion drug Claritin, now in phase II/III trials as "DCL." Southwell said that DCL should generate royalties to SEPR of over $100 million per year by the year 2001.
Southwell also discussed the just-announced (July 21) deal with J&J regarding Propulsid, the $1.2 billion heartburn drug. Sepracor's ICE is norcisapride, which has the potential to deal with a larger number of indications than the original. That means, said Southwell, that SEPR's version has a $4 billion market potential. Southwell said that while he could not discuss the exact royalty levels -- SEPR's largest-ever -- the deal was structured in such as way as to forego high up-front payments in favor of higher royalty levels in the future.
Southwell also discussed SEPR's attempt to improve Prozac, the depression drug, via its ICE version r-fluoxetine. Though Prozac is largest in sales among major depression drugs, with $2.6 billion, it is only growing at 9% per year, versus 15% for Zoloft, and 30% for Paxil at 30%. This is due to the latter drugs' better profiles regarding anxiety and to their faster "wash out" times. R-fluoxetine, SEPR's ICE that is now preclinical but should be launched by 2001, enjoys exactly the same profile as the faster-growing depression drugs, which speaks well to its outlook. Success here, said Southwell, leads to a high-class problem for Sepracor, namely, that of deciding whether to self-develop the new depression drug, to back license it to Eli Lilly (NYSE: LLY) and thereby preserve the Prozac franchise, or to license the drug to another drug company entirely.
Price Target
Our impressions of Sepracor being a highly innovative and opportunistic company were reinforced yesterday. We reiterate our Buy on SEPR and maintain a target price of $100 per share by year-end.
Analyst: Bob Hirschfeld
Updated 7/24/98 with SEPR at $55.25.
Recommended 11/18/97 at $38.88.
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Above from the iionline site. Is this the first time we've seen that "magical" $100 mark in print, as a SEPR price target? |
