The Zacks Analyst Blog Highlights: Boeing, General Electric, Lockheed Martin, Northrop Grumman and GlaxoSmithKline

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Aug 27, 2013, 09:30 ET

CHICAGO, Aug. 27, 2013 /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 the The Boeing Company (NYSE:BA-Free Report), General Electric Company (NYSE:GE-Free Report), Lockheed Martin Corporation (NYSE:LMT-Free Report), Northrop Grumman Corporation (NYSE:NOC-Free Report) and GlaxoSmithKline (NYSE:GSK-Free Report).

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Here are highlights from Monday's Analyst Blog:

Boeing's 787 Family Expands

Aerospace and defense major The Boeing Company (NYSE:BA-Free Report) completed the production of its first 787-9 Dreamliner. This new variant exceeds the 787-8 by 20 feet in length and has a superior flying range of 300 nautical miles (555 km). Most importantly, 787-9 will be able to carry 40 more passengers than the 787-8.

Boeing officials are planning to take this airplane for a test flight later this summer. First delivery is scheduled to take place in mid-2014 to the launch customer Air New Zealand. To date Boeing has received 366 airplane orders for this variant. The average cost of a 787-9 Dreamliner is $249.5 million at list prices.

The newest incarnation features the advanced design of the 787-8 model with 50% composite materials being used to manufacture the primary structure of this airplane. This makes the plane lighter and stronger than conventional aluminum that goes into the making of most aircraft. In addition, this airplane features advanced engines from General Electric Company (NYSE:GE-Free Report) and Rolls-Royce, which make them 20% more fuel efficient than similar-sized aircraft.

Boeing has officially launched another model of the 787 family, 787-10, at the Paris Air Show held in Jun 2013. The company has already started to receive positive response from commercial jetliners and is scheduled to make first delivery in 2018.

Boeing has so far been able to maintain its schedule for the 787-9 Dreamliner. This is creditable given the glitches and technical problems that had beset the 787-8, inordinately delaying its first delivery. Moreover, the dramatic grounding of all 787-8 airplanes due to battery related issues earlier in the year had sparked off a series of setbacks for Boeing's commercial airplane division.

Will Boeing be able to overcome the technical issues for 787-9? We are hopeful that these issues are not going to be repeated, but none the less raise our concern.

In addition to expanding its presence in the commercial airplane market, Boeing is also an important operator in the defense space. Boeing presently has a Zacks Rank #3 (Hold). Other well-placed defense operators having a favorable Zacks Rank are Lockheed Martin Corporation (NYSE:LMT-Free Report) and Northrop Grumman Corporation (NYSE:NOC-Free Report), both with a Zacks Rank #2 (Buy).

Pipeline Setback for Glaxo

GlaxoSmithKline (NYSE:GSK-Free Report) recently suffered a pipeline setback, when its Crohn's disease candidate, vercirnon, failed to meet both the primary and the key secondary endpoint in the SHIELD-1 phase III study (first of four phase III studies). Glaxo was evaluating the use of vercirnon in adults suffering from moderately-to-severely active Crohn's disease.

The randomized, double-blind, placebo-controlled, 12-week, SHIELD-1 study evaluated vercirnon in two doses (500 mg once daily and 500 mg twice daily) versus placebo in Crohn's disease patients. Not only did vercirnon fail to show significant clinical response and clinical remission (reduction or disappearance of symptoms) at 12 weeks, a direct correlation was found between dosage strength of vercirnon and overall adverse event rates. Adverse events and withdrawals in patients receiving vercirnon were similar to that in the placebo arm.

Glaxo has stopped recruiting new patients and dosing in the ongoing phase III development program for vercirnon until data from SHIELD-1 study has been reviewed in depth. The phase III development program includes four studies (SHIELD-1, SHIELD-2, SHIELD-3 and SHIELD-4), aimed to evaluated the safety and efficacy of vercirnon in more than 2,500 moderately-to-severely active Crohn's disease patients.

We are disappointed with the pipeline setback at Glaxo. The biggest near-term challenge for Glaxo will be to replace the revenues that will be lost to generic competition. Products like Paxil, Lamictal, Combivir and Epivir are already facing declining sales due to intense generic competition. Going forward, a major part of Glaxo's revenues will be exposed to generic competition as products like Pandemrix and Prepandrix are all scheduled to lose exclusivity in the next few quarters.

We believe that positive data from the program would have supported regulatory filings and increased Glaxo's chances of gaining marketing approval for vercirnon and provided a much needed boost to Glaxo's revenues.

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