Analyst Actions: Genentech, Ryder, Digital River
JEFFERIES DOWNGRADES GENENTECH TO HOLD FROM BUY
Genentech (DNA) says the FDA's Oncologic Drugs Advisory Committee voted 5 to 4 that data are not sufficient to establish a favorable risk/benefit analysis for the use of Avastin, in combination with paclitaxel chemotherapy, for treatment of patients who have not received chemotherapy for their locally recurrent or metastatic HER2-negative breast cancer.
Jefferies analyst Adam Walsh says the vote by the FDA's ODAC committee that data was not sufficient was a surprise, given robust Avastin effect on PFS (which represents the time patients live without their disease progressing) in E2100 trial. He now believes Avastin is unlikely to win FDA approval for metastatic breast cancer (mBC) at Feb. 23, 2008 PDUFA. He thinks most likely outcome is an FDA approvable letter with request for more data.
Walsh sees few near-term catalysts for DNA. Based on lower Avastin estimates in mBC, he cuts $3.50 2008 EPS view to $3.36, $4.05 for 2009 to $3.71. He lowers $85 12-18 month price target to $67.
MORGAN KEEGAN UPGRADES RYDER TO OUTPERFROM FROM MARKET PERFORM
Morgan Keegan analyst Art Hatfield tells S&P MarketScope that Ryder System (R) shares are attractive at current multiples, given the pullback in price in 2007. He notes the shares have been below $54 midpoint of his sum-of-the-parts valuation.
Hatfield believes Ryder is better positioned than in the last downturn in the business cycle, with a model focused on more contractual, less cyclical businesses and related contracts. He says the company has positioned itself to reduce risk going into 2008 by rightsizing commercial rentals fleet after recent slowdown and reducing number of used units for sale on its lots to normal levels.
He thinks its balance sheet is very healthy. And he sees Ryder making accretive acquisitions in 2008. He still sees EPS of $4.15 for 2007 and $4.25 for 2008.
DEUTSCHE BANK DOWNGRADES DIGITAL RIVER TO HOLD FROM BUY
Deutsche Bank analyst Jeetil Patel says while the fundamental value proposition at Digital River (DRIV) remains intact, he thinks the company has done little to diversify its business away from Symantec (SYMC). He notes SYMC's subscription business . . . has yet to migrate to DRIV in over a year, calling into question the deal or economics between the two companies.
Patel also notes several SYMC extended download service links have been disabled in recent months. He says SYMC indirect revenues are declining, placing pressure on operating margins. He also notes increased online ad spending from DRIV on behalf of its clients clearly hampers margins.
He cuts $422 million 2008 revenue estimate to $407 million and $2.28 EPS to $2.10. He believes the shares will remain rangebound around $40 in the near term.