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Biotech / Medical : Sepracor-Looks very promising -- Ignore unavailable to you. Want to Upgrade?

To: tnsaf who wrote (4365)	4/30/2000 8:14:00 PM
From: Ed Ajootian	Read Replies (1) \| Respond to of 10280

Investment Opinion: 04/28/00 at $88 5/8 We rate SEPR a STRONG BUY for the following reasons: * In our view, certain compounds developed by Sepracor could have a major impact in the treatment of common respiratory illnesses, especially in the $2.5 billion antihistamine category. The company's first product, Allegra, has been licensed to Hoechst Marion Roussel, which launched it worldwide to replace Seldane. * Sepracor received a considerable amount of publicity when it signed a deal with Eli Lilly (LLY) for the rights to R-fluoxetine, an improved version of Prozac, Lilly's top-selling drug. We believe this program is of great developmental importance to Lilly, as Prozac's patents expire in 2003. The Federal Trade Commission announced on 4/12/2000 that SEPR and Eli Lilly are free to close their $90M deal to exclusively develop and commercialize a purified form of Prozac (R-fluoxetine). We expect SEPR to receive milestone payments of up to $70M for R-fluoxetine as it progresses through clinical trials and tiered royalties once it is marketed. We estimate approval in 2002. Sepracor should now receive $21M in milestones in Q2 for the closing of the transaction. On a present value basis, we conservatively believe the value of Prozac to Sepracor is between $10 and $15 per share. We estimate this by discounting fully taxed future Prozac royalties between 2002 and 2015. * SEPR's worldwide development and marketing partner, Schering-Plough (SGP), has filed for approval in the U.S. and Europe for SEPR's desloratadine (DCL) an improved version of Claritin--the world's top-selling antihistamine. We anticipate U.S. approval late in 2000 with SEPR receiving estimated royalties of $6M. Claritin sales are estimated to be $4B in 2003. We forecast that SGP will launch DCL in 2001 and switch Claritin users to DCL in order to protect its franchise from generic competition. * More than 15 abstracts were presented on SEPR's DCL, Xopenex, norastemizole, and formoterol at the recent American Academy of Allergy, Asthma, and Immunology meeting. The majority of the data focused on DCL, which we believe indicates that DCL is a safe, well-tolerated, and potent H1 receptor antagonist. Partner Schering-Plough has filed an NDA for DCL, and we anticipate approval in late 2000. Head-to-head chamber study data appear to indicate that SEPR's norastemizole has a superior onset of action (OA) compared to Schering's currently marketed Claritin. More specifically, norastemizole has 20-minute OA compared to Claritin's 140 minutes. Xopenex Grand Symposia and additional clinical data could be incrementally positive to marketing efforts for the product. * Our $150 price target is derived using a 20 revenue multiple to our 2003 revenue estimate, discounted back at 20%. We believe this multiple is reasonable given commercial biotech names are trading at a mean revenue multiple of estimated 2000 revenue between 20-25. In addition, given the significant revenue expansion potential in Sepracor's model in the 2002 to 2007 time-frame, we believe this multiple could potentially be conservative. Prudential Securities Incorporated and/or its officers or its employees may have positions in any security of this issuer. Prudential Securities Incorporated makes a market in this security. ********************************************************** 20 X Revenues! Absolutely mind-boggling.