ST Robinson Lowers Chattem to 'Equal-Weight'

Analyst William Chappell downgraded amid news that Kemper Insurance is suing Chattem for excess product liability coverage

ST Robinson Humphrey downgraded Chattem (CHTT ) to equal-weight from overweight.

Analyst William Chappell says Kemper Insurance has sued Chattem, the maker of diet drug Dexatrim, seeking to rescind $50 million of excess product liability coverage, which was expected to be available to pay settlements related to outstanding Phenylpropanolamine litigation. He says while the suit might succeed, it could create a funding overhang which could impact Chattem's ability to make acquisitions in the near term. Chappell notes Chattem also cut the third-quarter estimate based on weaker Dexatrim and topical analgesic sales.

He cut the $1.21 fiscal 2003 (Nov.) earnings per share estimate to $1.17, and cut the $1.35 fiscal 2004 estimate to $1.30.

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