Sepracor Inc. (Nasdaq SEPR) on Friday posted a second-quarter profit, reversing a year-earlier loss, but cut its forecast for the year saying sales of its sleeping pill Lunesta will be lower than expected.
The company's shares rose nearly 2 percent, however, as speculation that Sepracor could be acquired offset disappointment over sales of its insomnia treatment.
"The value play guys are hoping for a takeout some time in the future," said John LeCroy, an analyst at Natexis Bleichroeder Inc.
The Marlborough, Massachusetts-based drug company said on a conference call that the rate of growth in the sleep drug market has been hurt by concerns over claims that certain drugs can cause episodes of amnesia, sleep walking and binge eating.
As a result, Sepracor said it is lowering its forecast for 2006 Lunesta sales to $620 million from a previous forecast of $650 million, and it cut its 2006 earnings per share forecast to $1.13 a share from a previous forecast of $1.50 a share. Its revenue outlook fell to $1.175 billion from $1.275 billion.
"The market has really changed over the past six months," said David Southwell, Sepracor's chief financial officer, in an interview.
The decision by U.S. regulators not to approve a long-lasting form of indiplon, an experimental insomnia drug being developed by Neurocrine Biosciences Inc. and Pfizer Inc. , removes a potentially formidable competitor to Lunesta. It could also make Sepracor an attractive takeover candidate.
However, the absence of Pfizer, the world's biggest drug company, also places more of the burden for expanding the market on Sepracor, Southwell said.
"We had thought we would spend a lot on direct-to-consumer advertising in the first half and back off in second half," he said. "Now we find we're the lead dog in the sled and to expand the market we need to expand our marketing and promotion budget in the second half of the year."
Sepracor said it needs to differentiate Lunesta from other products if it is to sustain its rate of growth. The company is gathering an increasing amount of clinical data showing Lunesta to be effective in patients with co-existing conditions such as depression, anxiety, rheumatoid arthritis and menopause.
Sepracor reported a net profit in the latest quarter of $11.7 million, or 10 cents a share, compared with a loss of $7.4 million, or 7 cents a share, a year ago.
Analysts had on average expected earnings of 9 cents a share, according to Reuters Estimates.
Revenue rose to $264.4 million from $185 million a year ago. Sales of Lunesta rose to $139.1 million, from $83.5 million a year ago. The drug was launched in April last year.
Sales of asthma medication Xopenex, rose to $117.3 million in the quarter from $83.2 million a year ago.
The company's shares rose 91 cents to $48.88 in early afternoon trading on Nasdaq.
The company's shares rose nearly 2 percent, however, as speculation that Sepracor could be acquired offset disappointment over sales of its insomnia treatment.
"The value play guys are hoping for a takeout some time in the future," said John LeCroy, an analyst at Natexis Bleichroeder Inc.
The Marlborough, Massachusetts-based drug company said on a conference call that the rate of growth in the sleep drug market has been hurt by concerns over claims that certain drugs can cause episodes of amnesia, sleep walking and binge eating.
As a result, Sepracor said it is lowering its forecast for 2006 Lunesta sales to $620 million from a previous forecast of $650 million, and it cut its 2006 earnings per share forecast to $1.13 a share from a previous forecast of $1.50 a share. Its revenue outlook fell to $1.175 billion from $1.275 billion.
"The market has really changed over the past six months," said David Southwell, Sepracor's chief financial officer, in an interview.
The decision by U.S. regulators not to approve a long-lasting form of indiplon, an experimental insomnia drug being developed by Neurocrine Biosciences Inc.
However, the absence of Pfizer, the world's biggest drug company, also places more of the burden for expanding the market on Sepracor, Southwell said.
"We had thought we would spend a lot on direct-to-consumer advertising in the first half and back off in second half," he said. "Now we find we're the lead dog in the sled and to expand the market we need to expand our marketing and promotion budget in the second half of the year."
Sepracor said it needs to differentiate Lunesta from other products if it is to sustain its rate of growth. The company is gathering an increasing amount of clinical data showing Lunesta to be effective in patients with co-existing conditions such as depression, anxiety, rheumatoid arthritis and menopause.
Sepracor reported a net profit in the latest quarter of $11.7 million, or 10 cents a share, compared with a loss of $7.4 million, or 7 cents a share, a year ago.
Analysts had on average expected earnings of 9 cents a share, according to Reuters Estimates.
Revenue rose to $264.4 million from $185 million a year ago. Sales of Lunesta rose to $139.1 million, from $83.5 million a year ago. The drug was launched in April last year.
Sales of asthma medication Xopenex, rose to $117.3 million in the quarter from $83.2 million a year ago.
The company's shares rose 91 cents to $48.88 in early afternoon trading on Nasdaq.
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