For Immediate Release
Chicago, IL – July 19, 2012 – Zacks Equity Research highlights SIRIUS XM Radio (SIRI) as the Bull of the Day and StanCorp Financial Group (SFG) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Mylan Inc. (MYL), Somaxon Pharmaceutical, Inc. (SOMX) and Par Pharmaceuticals Companies Inc. (:PRX).
Full analysis of all these stocks is available at http://at.zacks.com/?id=2678.
Here is a synopsis of all five stocks:
We upgrade our recommendation on SIRIUS XM Radio (SIRI) to Outperform based on its record-high net subscribers addition in the second quarter of 2012. This improved performance was mainly due to strong management execution on the back of rising auto sales.
We expect the company to improve in several other operational metrics, including adjusted EBITDA, free cash flow and further penetration in the U.S. auto sector, in the second quarter. Despite price rise of its services, SIRIUS XM has generated record-breaking net subscribers growth in the last two successive quarters. Solid conversion rate and effective marketing strategy helped the company to achieve this milestone.
Management predicted that this momentum will further intensify in the rest of fiscal 2012 and accordingly raised its prior guidance for fiscal 2012 revenue and net subscribers growth. Further, Satellite Radio 2.0 services will also boost its future financials.
We are downgrading StanCorp Financial Group (SFG) to Underperform from Neutral, following the company's announcement to post lower earnings in the second quarter. The company expects earnings to be $0.51 per share, hurt by lower favorable claims experience in the group long-term disability insurance business.
The Zacks Consensus Estimate is currently pegged at $0.85. The company is scheduled to release its second quarter results on July 23 after the bell. The company also expects to fall short of its full-year guidance, given its soft performance in the first half of the year.
Our six-month target price of $34.00 equates to 9.5x our earnings estimate for 2012. Combined with the annual dividend of $0.89 per share, this target price implies a negative return of about 7.1% over that period. This is consistent with our Underperform recommendation on the shares.
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Mylan, Somaxon Settle Patent Dispute
Mylan Pharmaceuticals Inc., a subsidiary of Mylan Inc. (MYL), recently announced that it has entered into a settlement agreement with Somaxon Pharmaceutical, Inc. (SOMX). The patent litigation was related to a generic version of Somaxon's insomnia treatment, Silenor (doxepin, 3 mg and 6 mg).
Under the terms of the settlement agreement, Mylan has the exclusive right to market an authorized generic version of Silenor for a 180-day period starting January 1, 2020, or earlier under certain pre-specified circumstances. Mylan’s right to commercialize Silenor’s authorized generic version can be extended for another 180-day period, post which Mylan will market its own generic version of Silenor.
Along with the settlement agreement, Mylan also signed a supply agreement for Silenor whereby Mylan will supply commercial quantities of Silenor to Somaxon.
Meanwhile, Somaxon also settled its patent litigation with Par Pharmaceuticals Companies Inc. (:PRX) related to a generic version of Silenor. According to the deal, Par Pharma has the right to sell its generic version of Silenor, subject to regulatory approval, only after the 180-day exclusivity period granted to Mylan expires.
We note that few days ago, Par Pharma entered into an agreement with an affiliate of leading global private equity firm TPG Capitals, whereby TPG will acquire Par Pharma for $1.9 billion.
Somaxon expects Silenor to generate revenues of approximately $2.8 to $2.9 million in the second quarter of 2012.
As of July 3, 2012, Mylan had 167 Abbreviated New Drug Applications (ANDAs) pending US Food and Drug Administration (:FDA) clearance, targeting $83.8 billion in branded sales annually. Mylan believes that about 37 of these ANDAs are first-to-file opportunities, representing approximately $25.6 billion in branded sales. The revenue figures are as per IMS Health for the 12 months ending December 31, 2011.
We are encouraged by Mylan’s geographic reach and product depth along with a robust generic product pipeline.
However, we are concerned about the company’s lackluster performance in the Europe, Middle East and Africa (:EMEA) region. Additionally, with most large branded drugs due to lose patent exclusivity within the 2017-2018 period, we have little visibility on the growth prospects of generic companies like Mylan beyond that timeframe.
Thus, we prefer to remain on the sidelines and have a Neutral recommendation on Mylan. The stock carries a Zacks #2 Rank (Buy rating) in the short term.
Get the full analysis of all these stocks by going to http://at.zacks.com/?id=2649.
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