This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Cephalon Still a Stressor

You have to wonder if Cephalon (CEPH) might act more shareholder-friendly by mailing motion-sickness medication to investors.

In recent years, Cephalon has produced a stream of upside surprises and downside shocks -- financial, regulatory, research-related -- which jolt the stock and keep stockholders queasy. Just in the past 15 months, shares bounced from the mid-$50s to the high $70s, then slipped to the mid-$60s, then rose to low $80s, then dropped to the high $60s.

Now, they're in the low $70s as Cephalon prepares to release third-quarter earnings on Nov. 8.

Forecasting the just-completed quarter and 2008 requires "sorting through many moving parts," said Gary Nachman of Leerink Swann, in a late-October research report to clients.

Despite the stock's bumpy ride and uncertainty over several issues, many analysts endorse Cephalon. Thomson First Call says buy ratings outnumber hold ratings by 17 to 10. Nachman is one of optimists, but he also injects some caution into his outperform rating.

His most immediate concern is an investigation by the U.S. Justice Department and another by Connecticut regulators of Cephalon's marketing practices for certain drugs. Cephalon has set aside $56 million in reserves to cover what is says is the minimum cost of a settlement.

Nachman says Cephalon might announce extra reserves on Nov. 8. In an August filing with the Securities and Exchange Commission, Cephalon said it was "reasonably likely" that any settlement or fines would "materially exceed" $56 million.

Nachman expects an agreement by year-end. Assuming the stock stays at its current level, Cephalon could absorb a settlement costing $300 million to $400 million "if it takes this major overhang away," he says. Nachman doesn't own shares. His firm is a market maker.

The analyst likes Cephalon for the new cancer-pain drug Fentora and the new sleep-disorders drug Nuvigil. "We believe Cephalon's oncology pipeline, especially the opportunity with Treanda, is very underappreciated," he says.

Treanda provided a boost on Oct. 23 when a late-stage clinical trial met its goal in treating a form of non-Hodgkins lymphoma, a cancer of the lymphatic system. Cephalon will seek approval from the Food and Drug Administration later this year. In September, Cephalon asked the FDA to approve Treanda for chronic lymphocytic leukemia.
1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $117.81 0.00%
FB $105.45 0.00%
GOOG $750.26 0.00%
TSLA $231.61 0.00%
YHOO $32.94 0.00%


Chart of I:DJI
DOW 17,798.49 -14.90 -0.08%
S&P 500 2,090.11 +1.24 0.06%
NASDAQ 5,127.5250 +11.3820 0.22%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs