Sepracor shares fall as revenue disappoints Wall Street
NEW YORK—Shares of drug developer Sepracor Inc. fell Friday as Wall Street expressed disappointment over lagging sales of the company's insomnia treatment Lunesta and the decline in first-quarter revenue.
The stock fell $1.56, or 7.3 percent, to $19.87 in afternoon trading. Shares have traded between $16.85 and $55.66 over the past 52 weeks.
The company topped Wall Street's first-quarter forecasts for adjusted profit Thursday, but revenue fell short as sales of Lunesta fell 8 percent to $135.6 million. Sales of the respiratory drug Xopenex inhalation solution fell 6 percent to $140 million.
"It remains difficult to get excited about Sepracor," Credit Suisse analyst Marc Goodman said in a note to investors. "Lunesta prescriptions remain in double-digit decline even though the company has made numerous changes to address this issue."
Xopenex also remain disappointing, he added, and the asthma drug Omnaris and nasal allergy spray Alvesco will be tough sells in a market full of generic competition. Goodman reaffirmed a "Neutral" rating with a $22 price target.
The company did reaffirm its 2008 profit and revenue guidance on Thursday, but those estimates could be lowered, said Friedman, Billings, Ramsey analyst David Amsellem, if sales remain sluggish.
He downgraded his rating on the stock to "Underperform" from "Market Perform" and cut his price target to $17 from $23, following the first-quarter profit report. He said the company will likely see significant research and development expenses as it markets Omnaris and Alvesco, making it more difficult for the company to meet its 2008 outlook.
On Thursday, the company also announced a patent dispute settlement with Arrow Group's Breath Ltd. unit over Xopenex, staving off generic competition until August 2012. Meanwhile, the company said it will buy Canada-based Oryx Pharmaceuticals Inc. in order to expand into the Canadian market.
Goldman Sachs analyst James Kelly acknowledged the company's move to improve business and diversify it revenue stream but still reaffirmed a "Sell" rating.
"The majority of franchises face significant competitive threats from deep-pocketed competitors," he said, giving Schering-Plough Corp. and Teva Pharmaceutical Industries Ltd. as examples. "For the base business, we expect pressure to build, either continuing to lower demand trends, or requiring additional spending."
Kelly raised his price target to $21.50 from $20, citing the patent settlement.
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