We recently downgraded our recommendation on specialty pharmaceutical company Santarus Inc. (SNTS) to Neutral. Santarus is focused on the acquisition, development, and commercialization of proprietary products and therapies that have the potential to treat gastrointestinal diseases and disorders, including gastroesophageal reflux disease (GERD). Santarus primarily focuses on the commercialization of proprietary immediate-release proton pump inhibitor (PPI) products.
Flagship product, Zegerid, has captured a nice niche in the GERD market, and the company has good upside potential with the product through partnerships with GlaxoSmithKline (GSK), Norgine and Merck (MRK). The launch of the tablet and over the counter (OTC) formulations of Zegerid in 2010, as well as the launch of Zegerid around Europe by EU partner, GlaxoSmithKline, all present potential positive catalysts for Santarus.
We are also excited about the recent re-acceleration in Glumetza prescriptions since Santarus began co-promoting the drug with DepoMed (DEPO) in Oct 2008. We are also impressed with management’s ability to in-license new products and expand the development pipeline. Long-term we like the position of the company, especially if Santarus can hold on to Zegerid until either budesonide or rifamycin, or both, gets on the market.
However, in the near-term, the active patent challenge from Par Pharmaceuticals (PRX) on Zegerid looms large. An unfavorable court ruling in the patent infringement case would be devastating as Santarus depends on Zegerid for growth. The outcome of active patent challenges is difficult to predict and we expect investor focus to remain on the Zegerid patent challenge going forward. We are moving back to a Neutral recommendation on Santarus with a target price of $4.50.
Read the full analyst report on “SNTS”
Read the full analyst report on “GSK”
Read the full analyst report on “DEPO”
Read the full analyst report on “MRK”
Read the full analyst report on “PRX”
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