2012-09-21 17:40:30 -
By David Moskowitz
SciClone Pharmaceuticals (NASDAQ:SCLN) started the day strong, as the company is
being cited by dealReporter as exploring strategic options. According to
sources, the publication is noting that the company may be exploring a potential
sale to private equity firms, and potentially strategic buyers like Celgene
(NASDAQ:CELG), Bristol-Myers (NYSE:BMY), Gilead (NASDAQ:GILD), and Novartis
(NYSE:NVS). Shares of SCLN are extraordinarily cheap, trading at a big discount
to U.S. specialty pharmaceutical companies, and even a discount to Chinese drug
companies on an EV/2012 Sales basis. The company is profitable, has strong cash
flow, and as a result has started buying back its own shares. In addition to
being attractive from a financial standpoint, SCLN has built a strong brand and
drug distribution engine in China and throughout Asia, which could be important
for
larger pharmaceutical companies, like those named above, to leverage with
regard to their product portfolios.
Earlier this week, the company noted that the long-anticipated price decrease
for lead product Zadaxin from the Chinese government will have a lower than
anticipated impact on earnings, therefore, we continue to expect that SCLN is
likely to raise its financial guidance when it reports 3Q 2012 earnings (see our
prior story). Expect SCLN shares to remain strong, with potential that the Cowen
analyst, who downgraded the shares in advance of the price decrease, returns to
the table with an upgrade now that the "negative event" has turned into a
positive catalyst. More importantly, SCLN's cheap valuation and strong franchise
is being recognized by both financial and strategic buyers. The average analyst
price target for SciClone is $7.75 based on fundamentals, and a take-out could
be at a premium to that level.
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