Merrill Lowers Sepracor Rating

Analyst Gregory Gilberts says the FDA's non-approval of Soltara was a very negative for the company

Shares of Sepracor (SEPR ) plunged after the U.S. Food and Drug Administration issued a non-approvable for the company's Soltara compound. Merrill Lynch downgraded the stock to near term reduce/sell from near term buy, and long term neutral from long term buy.

Analyst Gregory Gilberts says the FDA move was a very negative for Sepracor. In terms of financials, Gilberts removed Soltara revenues from his model, and slowed down expense growth as well. He had forecast revenues of $85 million form Soltara in 2002, rising to $600 million in 2005. The net effect: Gilberts narrowed his $5.22 2002 loss per share estimate to a $4.32 loss on the spending slowdown, but widened his $2.31 2003 loss estimate to a $4.62 loss. Once the stock corrects, says Gilberts, he will be in a better position to assess its potential. He points out that Sepracor's Xopenex franchise, and the company's product pipeline, have significant value.

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