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Biotech / Medical : Barr Laboratory BRL -- Ignore unavailable to you. Want to Upgrade?

To: radman33 who wrote (160)	5/28/1999 7:04:00 AM
From: harkenman	Respond to of 207

Barr Labs: Riding a Hot New Drug by Bob Hirschfeld 5/28/99 fnews.yahoo.com Nothing like a hot drug to jump-start a sagging pharmaceutical company. Case in point: Barr Laboratories (NYSE:BRL - news) . Its stock is trading around $31.94, down from its high of $49.75. However, its rapidly growing share of the tamoxifen market should reignite these shares very soon, say analysts. The generic drug maker currently has 10 proprietary products in development, three of which are fully patent protected, and it is an aggressive challenger of the patents held by major drug companies on top-selling drugs. In recent weeks, Barr met Business Week's criteria for delivering solid sales and earnings growth, and was named one of the magazine's "Hot Growth Companies." But the key to Barr's future growth these days is tamoxifen, a top-selling estrogen used to prevent and treat breast cancer. The drug was developed by both Astra Zeneca (NYSE:AZN - news) and Roche Holding (NASDAQ:ROHHY - news) . However, Barr received permission to sell the drug after it successfully challenged Astra Zeneca's patent. Barr currently buys the drug from Zeneca at a discount and resells it. When the drug comes off patent in 2002, Barr will have 180 days of generic exclusivity. In the third fiscal (March) quarter, strong sales of the drug helped to lift earnings per share by 74% to $0.54, two pennies above the Street consensus estimate, and revenue by 27% to $122.6 million. In that quarter, Tamoxifen sales increased 34% to $84 million, or two-thirds of the company's total. Says Warburg Dillon Read analyst Jerry Treppel: "We now think tamoxifen sales could exceed $320 million in fiscal 2000, $50 million more than our previous estimate." Not too shabby considering that company-wide sales came to $377 million in fiscal (June) 1998. Meanwhile, revenue from products manufactured for other drug marketers increased more than 25% to $29.5 million in the third quarter compared to a year ago, driven by Warfarin sodium anticoagulant, a generic drug which produced revenue of $12.6 million, an increase of 67% over the prior year. Barr also stepped up marketing efforts to grab more market share from DuPont's (NYSE:DD - news) Coumadin. The Barr drug now controls 27% of the new prescription market and 22% of total sales, which means its share of the market should continue to rise. Barr's operating ratios are also improving. In the third quarter, SG&A expenses declined to 7.4% of revenue versus 10.2% one year ago, owing to lower legal and governmental expenses. Legal expenses did not disappear altogether during the quarter, however, given Barr's legal challenge to Eli Lilly's (NYSE:LLY - news) Prozac and its battle in state legislative houses with DuPont over generic substitution of Warfarin for Coumadin. Altogether, Barr's operating margins improved to 16.8% from 11.8%. So far, investors haven't totally caught onto the tamoxifen story. Barr's price-to-book ratio is 3.9 versus the industry average of 7.4, its price-to-cash flow ratio is 15.7 versus 36, while its price-to-sales ratio is an amazingly cheap 1.9 versus 9.3. Yet Gruntal's David Saks notes: "The company's earnings outlook has never been brighter." Saks thinks Barr will net $2.10 a share in fiscal 1999, which ends next month, and earn $2.80 in fiscal 2000. That means shares currently trade at about 17 times current year and 13 times next year's estimated earnings. Specialty drug firms trade at 22-25 times earnings. That means that Barr is trading at a 40% discount to its peer group. And Saks' projection, though rosy, does not factor in Barr's potential home runs with generic Prozac and generic Premarin, should the feisty generic company succeed in its patent suits against these branded blockbuster products in the courts. Barr's Prozac challenge is currently at the U.S. Court of Appeals, and the company looks for a decision by early 2000. This is big, since Prozac enjoyed sales of $2.3 billion in 1998. Bottom line: Unlike many other "value" stocks, investors may not have to wait for a long period of time to realize the value in Barr Laboratories, since expanding sales of tamoxifen over the next year should drive the share price higher.