By Gene G. Marcial
When the Food & Drug Administration on Feb. 27 approved Estorra, a sleep-disorder medication from Sepracor (SEPR ), the stock bolted -- from 28 to 53 by Apr. 26. It has since backtracked to 44, as investors took profits. But there could be more gains ahead, say some pros, not only from Estorra's blockbuster potential but also from a possible buyout. Analysts think Estorra, set to hit the market in late 2004, will challenge Ambien, the top insomnia drug. "Sepracor is surely takeover bait, and I expect one of the big drugmakers will make a run for it," says Robin Manners West of State Investment Council in New Mexico, which owns shares. She says Sepracor has what Big Pharma wants: diversified drugs -- in asthma, allergy, hypertension, and urology -- plus Estorra. West figures Sepracor is worth 60 to 65 a share, based on 6.5 times its projected sales of $800 million in 2006, when it is expected to turn profitable. Consensus 2006 forecast, she says, is about $3 a share. West won't say which suitors are after Sepracor, whose specialty is improved versions of widely prescribed drugs. It has patents on 24 such drugs, designed to improve efficacy and dosage, with fewer side effects. Sepracor has licensing pacts with Schering-Plough (SGP ) and Aventis (AVE ). Herman Saftlas of Standard & Poor's (MHP ) says Estorra could become "the best-in-class insomnia drug," snagging 25% of the $1.5 billion sleep-disorder market. He rates Sepracor "accumulate." CFO David Southwell won't comment on the buyout speculation.
Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.
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