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

To: Thomas M. who wrote (4572)	10/19/2000 10:27:23 AM
From: LLCF	Read Replies (2) \| Respond to of 10280

09:26am EDT 19-Oct-00 Merrill Lynch (Investor Support) AMCALL SEPR SUMMARY RESEARCH SUMMARIES:Intra-Day Special Call; SEPR ML++ML++ML Merrill Lynch Global Securities Research ML++ML++ML RESEARCH SUMMARIES Intra-Day Special Call; SEPR Investor Support Sepracor (SEPR; $120.813; C-2-2-9) 00E d$2.50; 01E d$0.85 o Sepracor announced that Lilly has terminated the licensing and development agreement for R-fluoxetine. The decision was based on a cardiovascular side effect (QTc prolongation) that was observed at higher doses. SEPR has decided not to pursue the development R-fluoxetine further. o Given the strategic as well as financial importance of R-fluoxetine to SEPR, we believe the stock could overreact relative to magnitude of the potential EPS reduction. The three main factors likely to affect our model are (1) the removal of future milestone payments from LLY, (2) the removal of royalties on R-fluoxetine sales, and (3) higher R&D spending. Profitability is not likely to occur in 2002 as we had modeled previously. o We are in the process of reviewing our model to assess the impact of this announcement. We estimate at this time that our EPS estimates in 2002-2004 may have to be reduced by 5-10% per year based solely on the removal of R- fluoxetine royalties from our model. In addition, SEPR said it will not receive the previously expected $20 million milestone fee in 4Q:00 or the $50 million expected for 2001. Finally, R&D expenses will be ramped up faster than previously expected in order to accelerate the development of another drug SEPR is working on. o We expect the company to discuss its DDMS product on the conference call at 9AM this morning. DDMS is described by SEPR as a triple-mechanism compound that could treat depression and other disorders. The company is likely to expedite the development of this Phase II compound in order to launch it in 2004 (thus the higher R&D expenses). We know very little about this compound at this point. o Fortunately for SEPR, the company and its partners is working on numerous other clinical programs. Claritin's desloratidine (DCL), which was licensed from SEPR, is expected to be approved (or approvable) by Monday. More importantly, SEPR has retained full rights for noristemazole, a product for allergies with a potential potency and onset of action advantage over Claritin and DCL. SEPR expects to file an NDA for noristemazole later this year or early next year. There are five or more Phase II or Phase III drugs in development at SEPR. DAK