The Zacks Analyst Blog Highlights: GlaxoSmithKline, Roche, Nabors Industries, Patterson-UTI Energy and Ensco plc

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Dec 16, 2011, 09:30 ET

CHICAGO, Dec. 16, 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 GlaxoSmithKline (NYSE: GSK), Roche (OTC: RHHBY), Nabors Industries Ltd. (NYSE: NBR), Patterson-UTI Energy (Nasdaq: PTEN) and Ensco plc (NYSE: ESV).

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Here are highlights from Thursday's Analyst Blog:

Pipeline Setback for Glaxo

GlaxoSmithKline (NYSE: GSK) recently announced disappointing results from a phase III study TEACH (Tykerb Evaluation After Chemotherapy) of Tykerb (lapatinib) as a delayed adjuvant monotherapy for patients suffering from HER2 positive breast cancer. The data was presented at the 2011 CRTC-AACR San Antonio Breast Cancer Symposium.

The randomised, double-blind, placebo-controlled, study evaluated Tykerb in HER2 positive breast cancer patients, who remained disease free after receiving treatment and were not treated with Roche's (OTC: RHHBY) Herceptin (trastuzumab) in the first place. Results from the study revealed that only 13% patients in the Tykerb arm achieved disease free survival (the primary end-point) as opposed to 17% in the placebo arm after a median follow-up of 4 years.

Tykerb is approved for both as a monotherapy and also in combination with Roche's Xeloda (capecitabine) for treating patients suffering from advanced or metastatic HER2 positive breast cancer. We note that Tykerb is being evaluated for treating other oncological indications also.

Glaxo in a Neutral Lane

We currently have a Neutral recommendation on Glaxo. The stock carries a Zacks #3 Rank (Hold rating) in the short run.

While several products in the Pharmaceuticals segment are facing generic competition, the consumer side of the business is performing well and should drive top-line growth. Moreover, Glaxo's diversified base and presence in different geographical areas should help support revenue growth. Meanwhile, Glaxo's restructuring initiative should help offset the impact of increasing generic competition in the next few years and help earnings grow faster than revenues. Share buybacks should also drive bottom-line growth. While we remain concerned about generic competition, we are pleased with the Glaxo's efforts to develop its pipeline.

Nabors Sheds California Assets

Ramshorn Investments Inc, the wholly owned subsidiary of Nabors Industries Ltd. (NYSE: NBR), announced that it has completed the divesture of all of its interests in some oil and gas properties in California. The deal will fetch Nabors approximately $72 million in cash.

The assets were sold to an undisclosed buyer in a deal that entails the purchaser to continue utilizing Nabors' rigs.

We believe this sale highlights Nabors' efforts to divest low profit generating upstream properties and re-design its asset base. Management is expected to divest other holdings throughout 2012.

Barbados-based Nabors is a leading land-drilling contractor with oil, gas, and geothermal land drilling operations across the world. The company is also one of the largest land well servicing companies and workover contractors in the U.S.

Currently, Nabors owns and operates approximately 491 land drilling rigs and 749 land workover and well-servicing rigs in North America. Nabors' actively marketed offshore fleet comprises 39 platform rigs, 12 jackup units and 4 barge rigs in the United States and multiple international markets.

We believe that Nabors enjoys a large, high-quality fleet of drilling and workover rigs. Over the years, the company has not only grown through cash flow reinvestments but has also extended its geographic reach and diversified its operating assets beyond land rigs.

We expect Nabors to present robust results in the final quarter of 2011, fueled by the addition of new and advanced rigs, better pricing and commencement of several pending projects. Management also expects attractive expansion opportunities and growing demand for oil to boost the company's performance.

However, with businesses across the globe, Nabors' operations remain susceptible to various risks such as war, civil disturbances and government actions. With natural gas fundamentals remaining weak and a high debt level, we do not see much upside potential for the company in the coming months. Thus, we are maintaining our long-term Neutral recommendation on the stock.

Nabors competes with peers such as Patterson-UTI Energy (Nasdaq: PTEN) and Ensco plc (NYSE: ESV), and currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.

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