Sepracor shares fall on Medicare decision
Medicare plans to cut reimbursement levels for a drug from Sepracor Inc. sent company shares down nearly 15 percent this morning.
Sepracor is a Marlborough-based pharmaceutical company, and the drug affected by the Medicare decision is an asthma treatment called Xopenex.
The Centers for Medicare & Medicaid Services plans to assign the same temporary reimbursement codes to all forms of albuterol, including Xopenex, according to a posting on the agency's Web site.
Xopenex is an altered form of the generic drug albuterol.
"It was expected that a ruling was coming, but I didn't expect them to cut it to the price of a generic," said Jon LeCroy, an analyst at Natexis Bleichroeder Inc.
While Medicare did not specify the size of the price cut, only placing it in the same code as albuterol, LeCroy said he expected the drop to be as much as 70 to 80 percent and affect about 15 percent of Xopenex sales.
Officials at Sepracor, which also makes the insomnia drug Lunesta, were not immediately available for comment.
Last year, sales of Xopenex approached $600 million or roughly half the company's total sales.
Xopenex inhalation solution, which accounts for the bulk of the drug's sales, is administered via a nebulizer which converts liquid medication into a fine, inhaleable mist.
"This puts our Xopenex nebulizer revenue projection for 2007 at risk," said Michael Tong, an analyst at Wachovia, who estimates Medicare represents roughly 25 percent of Xopenex sales.
"Removing sales of Xopenex nebulizer into Medicare would reduce revenue by roughly $80 million in the second half of 2007, which translates to $0.61 downside to earnings per share," he said.
Sepracor's shares fell $7.62, or 14.6 percent, to $44.66 in late morning trade on the Nasdaq Stock Market.
(Reuters)
