BioCryst and the Financially Limber Analyst: BioBuzz

BIRMINGHAM, Ala. (TheStreet) -- What happens when a sell-side analyst needs to keep a stock rating and price target intact, but the business outlook for the company he's covering just took a dive? Well, the analyst simply uses some creative accounting. Call it valuation acrobatics.

Leerink Swann's Joe Schwartz used some nifty tricks Tuesday to retain his market perform rating and $10 price target on BioCryst Pharmaceuticals(BCRX Quote), despite announcing disappointingly small government request order for its flu drug peramivir Monday.

Schwartz's old $10 price target for BioCryst was based on a one times price-to-sales multiple on an assumed $394 million peramivir stockpiling order in the third quarter.

On Monday, BioCryst made it clear that a $394 million order for peramivir wasn't on the way, so Schwartz removed that revenue from his model and replaced it with $6 million in peramivir stockpiling revenue for the fourth quarter. (That's about half of what Schwartz thinks BioCryst could get from the government under the request for proposal just issued.)

So, $6 million in new peramivir revenue minus $394 million in old peramivir revenue equals a $388 million revenue shortfall in Schwartz's BioCryst financial model. Jeepers, you'd think it would be tough for the analyst to keep his $10 price target or his market perform rating with a huge projected revenue shortfall like that, right?

No sir! Schwartz simply adds new long-term peramivir revenue that wasn't in his model before and changes his valuation method. Presto! A new $10 price target!

"We have adjusted our valuation methodology by adding royalties on Japanese sales and 65% probability-adjusted seasonal flu sales in the US," writes Schwartz in his note to clients today. "We assume a 5x Price/Sales multiple based on 2015 worldwide probability-weighted sales of $103.4MM discounted back at 15.0%. We account for $1/share in cash and $2/share for platform value."

Which comes first: the chicken or the egg? Or in this case, Scwhartz's price target or his BioCryst financial model? Sounds like some rose-colored accounting, to me.

BioCryst shares were down 3.7% to $9.15 in recent trading.

Dendreon Hot Going into Thursday's Investor Meeting

(At 10:24 AM EDT)

Dendreon(DNDN Quote) shares are up 24% in the past week, closing Monday just shy of $30, as the company preps to address investors and analysts at a meeting Thursday morning in New York City.

Provenge, the company's prostate cancer immunotherapy (vaccine), will be the big focus of the investor gathering, of course.

Dendreon has been guiding towards a fourth-quarter approval re-filing of Provenge with the Food and Drug Administration, so unless the company's been burning the midnight oil, I wouldn't expect to hear anything different Thursday. Of course, any indication that Provenge's regulatory timeline is slipping would be a negative.

A deal for a Provenge marketing partnership in Europe would definitely get investors excited were it to be announced at the meeting, but again, it's probably a bit early for that. Words investors don't want to hear: "We've decided to go it alone in Europe."

Dendreon is likely to spend most of the three-hour meeting discussing commercial plans for Provenge. The nuts-and-bolts logistics of Provenge treatment -- from the patient's blood draw to the manufacturing of the personalized vaccine at the New Jersey plant to its shipment via air back to the doctor's office and administration to the patient -- is unique in cancer therapy and something the company probably still needs to get investors comfortable with.

Company executives should also discuss sales projections for Provenge.

I'd expect to hear a lot of talk about Provenge manufacturing, including timelines for the expansion and approval of the New Jersey facility, as well as build-out plans for the new plants outside Atlanta and greater Los Angeles.