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Wedbush Morgan Cuts Rating on American Pharmaceutical Partners

Wedbush Morgan Securities downgraded American Pharmaceutical Partners (APPX) to hold from buy, after the announcement Monday that the company plans to buy the privately held American BioScience.

Analyst Vinny Jindal sees likely near term shareholder dilution due to the company's proposed purchase of American BioScience. The analyst notes that American Pharmaceutical Partners is to issue 86 million additional shares to American BioScience holders and the deal is slated to close in the first half of 2006. Besides near term shareholder dilution, the analyst says a merger deal will increase operating costs starting in 2006. Wedbush Morgan plans to maintain its $1.19 2005 and $1.66 2006 earnings per share estimates until the merger closes, citing little insight into the financials of American BioScience. The analyst notes a preliminary 2006 earnings per share estimate could be as low as 30 cents to 35 cents, while the 2007 estimate could be as low as 65 cents to 70 cents.

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