Summary Ratings and Estimates
Company Price Rating Price Target PT End Date Metric Current FYE Next FYE
Alkermes, Inc. ($) 10.73 OW ($) 16.00 Dec-09 EPS Reported ($) 1.49 ($) 0.21
prior ($) 0.00 Sep-02 ($) 0.20 ($) 0.07
Amylin Pharmaceuticals ($) 11.42 N ($) 13.00 Dec-09 EPS Reported ($) (2.13) ($) (1.43)
prior ($) (2.12)
Arena Pharmaceuticals, Inc. ($) 4.22 N ($) 5.00 Dec-09 EPS Reported ($) (3.29) ($) (1.67)
Ariad Pharmaceuticals ($) 0.98 N EPS Reported ($) (1.06) ($) (1.07)
Array BioPharma ($) 4.23 OW ($) 6.00 Dec-09 EPS Reported ($) (2.86) ($) (2.31)
Biodel Inc. ($) 4.59 OW ($) 9.00 Dec-09 EPS Reported ($) (1.77) ($) (1.17)
Emergent BioSolutions ($) 26.26 OW ($) 32.00 Dec-09 EPS Reported ($) 0.73 ($) 1.46
Exelixis Inc ($) 5.16 N ($) 6.00 Dec-09 EPS Reported ($) (1.55) ($) (1.25)
prior ($) 0.00 ($) (1.57) ($) (1.20)
Human Genome Sciences ($) 2.10 N EPS Reported ($) (1.90) ($) (0.66)
Incyte Corporation ($) 3.90 OW ($) 8.00 Dec-09 EPS Reported ($) (1.99) ($) (1.71)
MannKind Corporation ($) 3.81 N EPS Reported ($) (2.74) ($) (1.47)
Nektar Therapeutics ($) 5.51 OW ($) 10.00 Dec-09 EPS Reported ($) (1.50) ($) (1.46)
Onyx Pharmaceuticals ($) 34.48 OW ($) 49.00 Dec-09 EPS Reported ($) 0.35 ($) 0.98
Orexigen Therapeutics ($) 5.89 OW ($) 18.00 Dec-09 EPS Reported ($) (2.81) ($) (2.51)
Seattle Genetics ($) 9.21 OW ($) 12.00 Dec-09 EPS Reported ($) (1.01) ($) (0.88)
prior ($) 0.00 Oct-02
The Medicines Company ($) 16.42 N ($) 18.00 Dec-09 EPS Reported ($) (0.06) ($) 1.21
prior ($) 0.00 Feb-03
VIVUS, Inc ($) 5.37 OW ($) 15.00 Dec-09 EPS Reported ($) 0.02 ($) (0.78)
Source: Company data, Reuters, J.P. Morgan estimates. All prices as at 05 Jan 09.
See page 38 for analyst certification and important disclosures.
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We are introducing YE 2009 price targets for companies in our coverage universe.
Acknowledging that there is no “one-size-fits-all” valuation approach in biotech, we
utilize three different methodologies (real options, rNPV, and P/E) and also
incorporate a “catalyst/liquidity” discount to more appropriately reflect the impact of
both macro and company-specific issues. This report includes a 2-page review of our
valuation approach and 2009 outlook for all 17 of our covered companies.
• Greater conviction in mid-caps…Amid today’s tumultuous environment, we
suspect investors will gravitate to companies with strong balance sheets and greater
potential for near-term growth. Within our universe, we believe ONXX best fits this
bill (and, hence, is our top pick for 2009). We also believe ALKS is in an attractive
position, despite the ongoing controversy surrounding exenatide once weekly.
• …But greater potential for significant upside in select small caps. Small cap
biotechs are obviously more event driven in nature, and importantly, there is an
abundance of potentially significant catalysts in 2009 (over 15 Ph3 data releases
expected in our universe alone, including 8 obesity trials), in our view. Based on our
initial YE09 targets, OREX has the greatest potential upside (200%+ from its 12/31
close of $5.58), which is not surprising considering we expect 5 important 2009 data
releases (four Ph3 and one Ph2b) and 1-2 potential partnerships. However, we
believe its chances of actually meeting this target will greatly depend on data
expected later this week or early next at the J.P. Morgan healthcare conference.
• Key focus on balance sheets. Within our universe, we believe ONXX, ALKS, and
MDCO have the strongest balance sheets. On the other hand, we believe the three
most tenuous are HGSI, INCY, and ARNA.