Markets & Finance

J.P. Morgan Upgrades Cephalon to 'Overweight'


J.P. Morgan upgraded Cephalon (CEPH) to overweight.

On Wednesday the maker and marketer of neurology drugs said it would defend its patent on its No. 1 drug, Provigil, a treatment for excessive daytime sleepiness, after the FDA accepted an application from a generic drug maker for the generic form of Provigil.

Analyst Corey Davis says he normally wouldn't upgrade a stock the day after bad news. However, he says he already expected generic drug companies to file abbreviated new drug applications for this top-selling drug. With shares trading from $53 to $46 over the past few weeks, he thinks the stock has bottomed.

Moreover, Davis says he's always assumed generics would arrive in mid-2006. The basic patent on modafinil, an active element in Provigil, expired in 2001. Cephalon has a patent on the particular formulation it uses, and that patent lasts until 2014. But generic modafinil could reach the market as early as 2006 if a generic maker can challenge the patent.

Davis raised his 35 cents fourth quarter earnings per share estimate to 40 cents, and upped the $1.20 2002 estimate to $1.26 on strength of Cephalon's Actiq drug for cancer pain. He also sees $1.60 2003 earnings per share.


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