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Sepracor Gets Brovana Boost

Shares move higher as approval of the lung-disease treatment comes faster than expected.

Shares of

Sepracor

(SEPR)

rose Monday after the company received faster-than-expected approval of the lung-disease treatment Brovana.

The Marlborough, Mass.-based company, best known for the insomnia drug Lunesta, said late Friday that the Food and Drug Administration approved Brovana as maintenance therapy for chronic obstructive pulmonary disease.

The approval expands Sepracor's lung-disease offerings; the company also makes Xopenex as a treatment for asthma. Sepracor expects to launch Brovana during the second quarter of 2007.

Investors pushed the stock up 59 cents, or 1.2%, to $50.79 Monday, on nearly twice the average daily trading volume.

Roughly 12 million adults have chronic obstructive pulmonary disease, which consists of two main illnesses, chronic bronchitis and emphysema. Sepracor, citing 2004 federal health care statistics, says chronic obstructive pulmonary disease is the fourth-leading cause of death in the U.S.

While Brovana helps treat the disease, clinical trials show the inhalable drug doesn't have an impact on disease progression or patients' survival.

Brovana's approval came approximately six months faster than the company had predicted or analysts had expected, wrote A.G. Edwards analyst Aaron Reames in a research report Monday.

Usually, the FDA division governing allergy and lung-disease drugs issues a conditional-approval notice, requesting additional information, said Reames, who has a buy rating on the stock.

According to Reames, Brovana is a cousin of Foradil, which is marketed by

Schering-Plough

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(SGP)

and

Novartis

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in Europe. But Brovana is twice as potent, he said.

Reames said that Sepracor's biggest market for Brovana will be hospitals, although the primary-care and home-health care markets also should provide some sales. Reames doesn't own shares; his firm makes a market in the stock.

Some analysts say the emergence of Brovana makes Sepracor a more attractive takeover candidate since its product portfolio is now more diversified.

Ever since Sepracor began selling Lunesta in early 2005, the company has been periodically mentioned as a potential takeout target due to its strategy of selling Lunesta by itself rather than with a partner.

Sepracor is selling Lunesta against insomnia products from much bigger companies, such as

Sanofi-Aventis

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and

Takeda Pharmaceuticals.

"We believe a potential acquirer could realize certain synergies ... and grow Lunesta beyond its current growth trajectory," wrote Biren Amin of Stanford Group in a Monday research report. Amin, who doesn't own shares, has a buy rating. Stanford Group is a market maker.