Santarus, Inc. (SNTS) is a specialty pharmaceutical company engaged in 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). The company's lead product, Zegerid, is a combination of a proton pump inhibitor and one or more antacids.
Although we are pleased to see that Santarus is working on strengthening its presence in the GERD market, we remain concerned about the intense competition in this market. We believe that investor focus will remain on Zegerid prescription trends over the next few quarters. We recommend waiting on the sidelines until visibility improves.
Zegerid presents a distinctive pharmacological profile compared to other proton pump inhibitors. Although Zegerid's performance was a major disappointment during the initial launch period, sales started picking up with the launch of the capsule formulation in March 2006. We are pleased to see that the company is working on strengthening its commercial presence in the highly competitive GERD market which is dominated by big names like AstraZeneca (AZN), Wyeth (WYE), TAP and Johnson & Johnson (JNJ).
The company intends to drive sales for Zegerid through additional promotional efforts, further managed care wins and a price increase taken in April 2008. We were also pleased to hear about Santarus agreements with GlaxoSmithKline (GSK) which provide the company with a source for future revenue. Going forward, we believe that the Zegerid patent infringement lawsuit against Par Pharma (PRX) will remain an overhang on the shares.
In our opinion, the company needs to reduce its dependence on the Zegerid line of products and should try to boost growth through the in-licensing or acquisition of suitable candidates. We maintain a Hold rating with a target price of $3. Our $3 target price is based on a P/S ratio of 1.3x our 2008 revenues.
Arpita Dutt, CA, contributed to this report.
Read the full analyst report on SNTS.
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Read the full analyst report on WYE.
Read the full analyst report on JNJ.
Read the full analyst report on GSK.
Read the full analyst report on PRX.
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