Susquehanna Upgrades Simcere Pharmaceutical Group (SCR) to Positive; Raises FY10-12 Estimates

October 20, 2009 8:46 AM EDT

Susquehanna upgrades Simcere Pharmaceutical Group (NYSE: SCR) from Neutral to Positive. Price target $11.

Susquehanna analyst says, "We recently had the opportunity to visit SCR in China and had more discussions with the management since the release of EDL pricing. We are raising our numbers for FY10-FY12 and upgrading SCR to Positive. While our 3Q/4Q09 EPS remain below consensus, we believe SCR is about to exit a tough stretch and the stock is poised for upside in front of multiple catalysts that will drive the growth for FY10 and beyond: 1) expect the upcoming release of National Insurance Coverage (NIC) by the end of November to broaden coverage of more than one of the three key products - Bicun, Endu, and Anxin - which could result in immediate and more significant than expected revenue and EPS upside; 2) EPS upside due to consolidation of Yanshen, potentially starting 4Q09; 3) reversal of inventory reduction likely before YE09; 4) significant, albeit likely gradual net benefit from EDL products starting FY10; 5) potential approval of Iguratimod and generic Enbrel by 1H10; and 6) potential acquisition premium as we expect "big will get bigger." Our closer review of EDL pricing also suggests that only ~18% of SCR's FY09 revenue will be negatively affected by ~10% due to EDL price reduction, and we detailed various strategies that SCR is considering to protect its margin."

To see more analyst ratings on SCR Click Here.

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