Article in it's entirety:
Chalk One Up for Sepracor's Shorts - An Undone Deal
Amy Kover/Fortune
When Sepracor hit $140 per share in March, it
looked like vindication for the Boston biotech's
controversial strategy: It cleans out unwanted
molecules from blockbuster drugs, then licenses
the improved version back to the original
manufacturer for marketing. But as FORTUNE reported
(One Hot Biotech, Jan. 11, 1999), short-sellers have
also been watching Sepracor. Traders last fall shorted
as much as 19.7% of the outstanding shares, betting
that some of the company's highly publicized
pharmaceutical deals would fall apart.
Chalk one up for the shorts. Sepracor tumbled to around
$60 in May after Johnson & Johnson decided not to help
market norastemizole, the version of its allergy drug
Hismanal that Sepracor is developing. Granted, that
wasn't Sepracor's largest pipeline product. And the
biotech still plans to launch norastemizole in two years.
But the botched deal shook the Street's
confidence. "Up until J&J, the majority of
people believed that most deals were pretty
solid," says Bear Stearns' David Maris, the
only analyst until recently with anything
less than a "buy" rating on Sepracor (and
now the only one with an outright "sell").
One day after the J&J news, analysts
shaved earnings estimates for 2000 by 24
cents, according to First Call. Three
Sepracor board members have sold their
holdings, and hedge fund manager Mike
DiCarlo has completely wiped out his
position for now.
The superbulls still have faith in miracle
drugs from Sepracor--or miracle stock
prices. Salomon Smith Barney, Gruntal, and
Morgan Stanley are keeping their "buys."
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