Merriman Initiates Coverage of Cephalon, Sees Long-Term Strength but Short-Term Volatility

NEW YORK -- Merriman Curhan Ford & Co. initiated coverage of Cephalon Inc. Monday, predicting the company will perform well in the long-term due to new products. But analyst E. Russell McAllister said he sees short-term volatility as the pharmaceutical maker transitions patients to the second-generation drugs.

McAllister set a "Neutral" rating on the Frazer, Penn.-based company's shares in a client note.

The analyst said Cephalon's new medicines include Nuvigil, which treats excessive sleepiness, cancer-related pain reliever Fentora, and Sparlon for attention deficit/hyperactivity disorder. These medications are expected to produce $1.5 billion revenue for 2006, wrote McAllister.

"We believe these products represent meaningful long-term growth opportunities for Cephalon," he wrote.

McAllister also predicted prescription growth for Vivitrol, an alcohol dependence treatment that received regulatory approval in April.

The analyst noted that Cephalon faces "significant" competition, and could face difficulties in transitioning patients to its new drugs.

Shares closed the Monday Nasdaq session at $62.96