Merrill Lynch downgraded Pharmaceutical Resources (PRX ) to neutral from buy.
Analyst Gregory Gilbert says ever since the drugmaker launched a generic version of antidepressant Paxil on Sept. 8, its stock is up about $11. While Gilbert thinks the upwards move may be justified, he also thinks the Street's estimates may be too low for 2003 and 2004 and he expects the stock to take a breather.
Gilbert has confidence that management will take advantage of this period of earnings and cash flow upside to improve the long-term growth potential -- maybe in the form of increased R&D spending and M&A activity. He sees $3.34 2003 earnings per share (GAAP), and $3.66 for 2004. Additionally, he notes Pharmaceutical Resources could deliver results well ahead of estimates if no other generic companies launch generic Paxil in the coming quarters.