Rich Suitors May Come Courting Curis

By Gene G. Marcial

An Inexpensive Date
With three big pharmas -- Genentech (DNA ), Johnson & Johnson (JNJ ), and Wyeth (WYE ) -- as its partners, tiny Curis (CRIS ) is a "sitting duck" for a takeover as it develops drugs to combat a number of diseases. So say some investors who own shares but don't want to be named. They note that Curis' market cap is just $200 million. One hedge-fund manager puts Curis' buyout value at 9 a share, or $423 million. Its technology uses proteins or small molecules to modulate "regulatory pathways" that control the repair and regeneration of tissues and organs. Curis has come up with drugs aimed at basal cell carcinoma, with Genentech as its partner; kidney diseases, with J&J; and cardiovascular and neurological ills, with Wyeth.

John Sullivan of investment bank Leerink Swann, which has done banking for Curis, rates it "outperform" based solely on its pipeline of products that, he says, the big drugmakers see as promising. He expects Genentech could file this year for FDA "new drug"approval of Curis' product for carcinoma so it can start clinical trials. Sullivan says this will boost the stock, now at 4.10, up from 2.46 in August. He figures Curis could end up with more than $100 million in milestone payments -- plus royalties -- from Genentech once the drug is approved and commercialized. He expects about the same sum from J&J. Sullivan sees Curis profitable in 2008, earning $25 million, or 50 cents a share.

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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