The Zacks Analyst Blog Highlights: AstraZeneca, Targacept, Constellation Energy Group, Exelon and Duke Energy

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Nov 11, 2011, 09:30 ET

CHICAGO, Nov. 11, 2011 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include AstraZeneca (NYSE: AZN), Targacept, Inc. (Nasdaq: TRGT), Constellation Energy Group, Inc. (NYSE: CEG), Exelon Corporation (NYSE: EXC) and Duke Energy Corporation (NYSE: DUK).

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Here are highlights from Thursday's Analyst Blog:

AstraZeneca Candidate Disappoints

AstraZeneca (NYSE: AZN) and Targacept, Inc. (Nasdaq: TRGT) recently presented disappointing data on their phase III candidate, TC-5214. The companies presented top line data from the first of four RENAISSANCE phase III studies which are being conducted to evaluate the use of TC-5214 as an add on therapy to antidepressant.

The study assessed the efficacy and tolerability of the candidate in patients with major depressive disorder (MDD) who do not respond adequately to initial antidepressant treatment.

The study failed to meet its primary endpoint of change on the Montgomery-Asberg Depression Rating Scale (MADRS) after eight weeks of treatment with TC-5214 as compared to placebo. However, the candidate was found to be well tolerated and showed an adverse event profile consistent with an earlier phase IIb study.

The remaining RENAISSANCE phase III studies have completed enrolment with results expected by the first half of 2012. The company expects to file for US approval in the second half of 2012, while the EU filing is planned for 2015.

TC-5214, if successfully developed and approved, could be the first-in-class nicotinic channel modulator to serve as an adjunct treatment for MDD in patients with an inadequate response to initial antidepressant therapies.

AstraZeneca licensed the drug from Targacept in December 2009. The agreement granted AstraZeneca exclusive development and commercialization rights to TC-5214, in exchange of certain milestone and royalty payments.

Our Recommendation

We currently have a Neutral recommendation on AstraZeneca. The stock carries a Zacks #3 Rank (Hold rating) in the short run. Even though we are encouraged by the strong cardiovascular franchise at AstraZeneca and the company's focus on the high-potential emerging markets, we remain concerned about the generic competition faced by its key products. The company is looking to lessen the impact of genericization by reducing its cost structure. Meanwhile, the weak late-stage pipeline at AstraZeneca also bothers us.

Constellation Completes Solar Farm

Constellation Energy Group, Inc. (NYSE: CEG) has completed the construction of a 6.5-megawatt solar generation project that will supply affordable energy to the utility's customers. The solar power system will be owned and maintained by Constellation Energy.

The solar project is expected to generate approximately 10 million kilowatt-hours of electricity per year. Under a 25-year power purchase agreement, the city of Vineland, owner and operator of the Vineland Municipal Electric Utility, will purchase all the electricity generated by the solar panels at a fixed rate.

Generation of the same amount of electricity using nonrenewable sources would result in the release of 7,584 metric tons of carbon dioxide or equivalent emissions from 1,487 passenger vehicles annually.

The solar power system comprises approximately 27,896 photovoltaic panels that are ground-mounted at two locations, one 4 megawatts in West Vineland and the other 2.5 megawatts in North Vineland.

Before the construction, Constellation Energy had acquired the 6.5 megawatt project from solar power developer Community Energy Solar in early 2011.

Constellation Energy Group Inc. is a diversified energy company with regulated and merchant businesses. The visibility of its underlying earnings strength is enhanced by a geographically disparate customer base and a diversified power generation portfolio, as well as a strong balance sheet.

By structuring its solar projects as power purchase agreements, Constellation Energy requires no upfront capital from its customers and is able to provide power at a fixed cost that is less than projected market rates. Looking forward, our favorable opinion on Constellation Energy also stems from the ongoing merger deal with Exelon Corporation (NYSE: EXC).

These positives, however, are offset by the company's significant Maryland exposure, risks in the merchant power space, pending regulatory cases and a low-dividend yield. The company presently retains a short-term Zacks #3 Rank (Hold) that corresponds with our long-term Neutral recommendation on the stock.

Recently, Constellation Energy reported third quarter 2011 results. In the reported quarter, the company's adjusted earnings per share of 68 cents came in below the Zacks Consensus Estimate of 89 cents. One of its peers, Duke Energy Corporation (NYSE: DUK) announced third-quarter 2011 operating earnings of 50 cents per share, beating the Zacks Consensus Estimate by 3 cents.

Baltimore-based Constellation Energy is a diversified holding company for a group of energy businesses focused on wholesale power marketing and merchant generation. The company also provides regulated electricity and gas services in central Maryland through its subsidiary, Baltimore Gas and Electric Company (BGE). Constellation Energy operates through three operating segments – Non-Regulated businesses, Regulated Electric, and Regulated Gas.

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