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efforts to "enhance shareholder value" had the opposite effect in trading Tuesday. But some analysts say the reorganization moves might be just what the company needs to get its shares out of intensive care.

Sangstat's Tuesday plunge

SangStat shares closed down $2.50, or 21%, to $9.50, after the company said late Monday that third- and fourth-quarter losses would be larger than analysts' forecasts, due to heavier-than-expected competition in the organ-transplant market.

Now SangStat says it plans to refocus on a newer product called Thymoglobulin, while ending clinical development of some products and selling its mail-order pharmacy unit.

Some analysts say the company now seems well undervalued, particularly after today's share-price rout. Analysts say the company, while still unprofitable, could generate nearly $100 million in sales next year, but its market value is now a dismal $170 million.

Changing Horses

"The stock is oversold; it's cheap," says Evan Sturza, of

Sturza's Medical Research

, a New York biotech analysis company. Sturza says SangStat's fair value should be at least 15, nearly double today's close. Sturza's does no underwriting.

SangStat's previous goal was to take a large chunk of a market for immunosuppressants, which are medications that must be taken by millions of transplant patients to prevent organ rejection.

Off the Peak
Sangstat shares well off their highs

The $1.3 billion market has been overwhelmingly dominated by


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, with Neoral and Sandimmune, but new products from SangStat, private generic company


and other companies jumped into the market from 1999 when Neoral lost patent protection.

SangStat admitted yesterday that the market was less attractive than originally thought. "The changing nature of the cyclosporine market ... has reduced the overall potential of this market for SangStat," it said in a statement.

While SangStat plans to continue selling Gengraf, a cyclosporine formulation it markets with

Abbott Labs

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, it now plans to boost resources behind Thymoglobulin, a kidney-transplant drug that it's testing for a broader range of uses. The company forecasts the two products could generate more than $60 million in sales next year.

Combined with $10 million it expects to gain from selling its mail-order pharmacy, the

Transplant Pharmacy

, and other products, analysts say SangStat could generate revenue of close to $100 million next year. And it said it expects to become profitable by 2002.

Value Play

"A drug company worth $170 million but could have revenue close to $100 million next year," says one analyst for a major New York investment bank who asked to remain anonymous. "That's an unheard-of multiple."

The analyst said the share price is now likely to attract both value investors and takeover interest, although he said many big institutional investors have long since abandoned the stock.

Adding to the positive investment mix was news that CEO Jean-Jacques Bienaime will replace Philippe Pouletty as chairman. Pouletty was seen as having overly optimistic assessments of the cyclosporine market opportunity, this analyst said.

"The company comes with lots of baggage," he said. "But with baggage comes opportunity."