This morning, with the markets in free fall, it helps
to read some positive comments copied from Individual
Investor On-line:
Oct 15, 1999
Sepracor's Pipeline Looks Full Heading Into 2000
(10/15/99)
Though it has been a turbulent year for investors in Sepracor (NASDAQ:SEPR - news) , there is plenty to be excited about in the coming quarters. Specifically, the
drug development company is on track to roll out a steady stream of new drugs that should put the company's long-term merits into better focus.
Sepracor now has 22 drug products either approved or in development, with a total market potential of nearly $18 billion in revenues. And Sepracor also has a number
of legal, clinical, and entrepreneurial drivers, all likely to soon emerge. Near term, though, news flow will beat cash flow.
The key launches we see:
Sepracor's improved version of Claritin, which is likely to be filed the fourth quarter, with launch expected in 2000.
The European distribution, of Sepracor's single isomer version of Zrytec, already Europe's leading nonsedating antihistamine. The Zyrtec launch is also expected in
2000. Royalty levels, which begin at 5%, and escalate to 12% depending on sales performance, are very high.
The likely announcement of a licensing deal for norastemizole, Sepracor's antihistamine product, to a drug company, possibly Glaxo Welcome (NYSE:GLX - news)
, in the near future, meaning by that one quarter or two.
The near-term prospects for "son of Prozac," which is beginning a large Phase II trial. A second , non-clinical but still very important catalyst would be the
long-awaited FTC decision regarding Eli Lilly's agreement with Sepracor to improve Prozac. The decision, which is expected by most analysts to be favorable to
Sepracor and Lilly, is expected the fourth quarter.
Also near-term, there are a number of clinical results to be announced, according to Peter Drake at Prudential Vector. One, the data on norastemizole, which are
expected to be released in early 2000, and two, are the data on Sepracors' anti-incontinence drug s-oxybutynin, expected late this year or early next.
Just last week, Sepracor announced an agreement with Rhone-Poulenc (NYSE:RP - news) , for access to the data package and for the right to US registration for
zoplicone, a rapid acting product for treating sleep disorders. Shares rallied over 10% on the news, though have since given back their gains.
According to David Saks, the Gruntal analyst, the deal will likely accelerate the development of Sepracor's single-isomer version of zoplicone; filing is now expected
in 2001 and launch in 2002, a year ahead of earlier plans. Sepracor's version of the drug has very rapid onset, optimal duration, and reduced side effects. The market
for sleep disorders is approximately $600 million and growing at 20% per year.
Yet the good news on zoplicone is near-term bad news, in that it means R&D costs will continue to rise. On the news Saks, who is a long-time bull on Sepracor,
lowered estimates on Sepracor, to a loss of $1.60, rather than $1.12, for the upcoming third quarter, and to a loss of $5.00, rather than $4.42, for the year. Saks cited
the greater-than-expected increase in R&D expenses, along with slower-than-expected tempo of Sepracor's directly marketed Xopenex, as reasons for the reductions.
In sum, the current share price steeply discounts the longer-term value of Sepracor's extensive portfolio of patented improvements on a variety of blockbuster drugs.
We remain bullish.
Analyst: Bob Hirschfeld
Updated October 14 with Sepracor trading at $74 per share
Recommended 11/16/98 at $70.75 |
