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Strategies & Market Trends : Market Gems-Trading Strong Earnings Growth and Momentum -- Ignore unavailable to you. Want to Upgrade?

To: TraderXx who wrote (4071)	2/8/2001 1:21:06 AM
From: Jenna	Respond to of 6445

More on BRL: This Recommendation Calls For Some Prozac TOMORROW morning is the broadcast, they invited everyone to listen to the webcast. You need to bring your own Prozac though. Edited by Thomas Granahan Of DOW JONES NEWSWIRES (Call Us: 201 938-5299; All Times Eastern) MARKET TALK can be found using code N/DJMT 1:17 (Dow Jones) Shares of drug maker Barr Laboratories Inc. (BRL) are off 11% after Arnhold and S. Bleichroeder took the step - unusual for an investment firm - of starting coverage on the company with a sell rating. Bleichroeder analysts believe the stock's price has been "hyperinflated" by misperception that opportunities are big for manufacturing generic versions of drugs like Prozac that have expiring patents. (RS)=DJ Barr Labs/Rating -2: Stock Above Fair Value - Analysts Sell ratings from investment firms are extremely rare. Strong-sell and sell ratings account for only 1% of all stock ratings, according to First Call/Thomson Financial, which tracks investment opinions. Bleichroeder analysts wrote they believe fair market value for Barr's stock is $22, well below recent levels. Investor expectations that patent expirations will fuel big opportunities for generic drug companies ignore "the realities of fundamental 'generic economics,' " the analysts wrote. Under such fundamentals, revenue volume cannot offset rapid declines in product prices, the analysts wrote. "In our opinion, the absence of product differentiation, the removal of any barriers to entry via Hatch-Waxman (legislation), mandated substitution, and commodity pricing environmentals all combine to make generic pharmaceuticals a slash-and-burn business," the analysts wrote. In early August, Barr's stock rose from $45 to $80, apparently on word that the company could be the first generic maker of fluoxetine, known by the name-brand Prozac, the analysts noted. But the analysts wrote that if Barr received 180-day exclusivity on the anti-depression drug, generic Prozac would represent roughly $1.60, or 50%, of Barr's estimated fiscal 2002 earnings of $3.37 a share. If the company does not receive exclusivity, manufacturing the drug would only add about 5 cents a share to earnings. "This 'exclusivity bonus' represents an EPS contribution for only six months. Whether $1.00 or $2.50, it would only be worth a (price to earnings multiple) of one times earnings; e.g. 'much ado about nothing,"' the analysts concluded. -By Ross Snel, Dow Jones Newswires; 201-938-5285; ross.snel@dowjones.com