The Zacks Analyst Blog Highlights: Watson Pharmaceuticals, Takeda Pharmaceutical, Pfizer, Sanofi and StanCorp Financial Group

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Aug 20, 2012, 09:30 ET

CHICAGO, Aug. 20, 2012 /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 Watson Pharmaceuticals Inc.(NYSE: WPI), Takeda Pharmaceutical Co. Ltd. (OTC: TKPYY), Pfizer Inc. (NYSE: PFE), Sanofi (NYSE: SNY) and StanCorp Financial Group Inc. (NYSE:SFG).

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Here are highlights from Friday's Analyst Blog:

Watson Pharma Sues FDA

Watson Pharmaceuticals Inc. (NYSE:WPI) recently announced the filing of a lawsuit against the US Food and Drug Administration (FDA), challenging the regulatory body's decision related to Watson's entitlement to the shared exclusivity for its generic version of Takeda Pharmaceutical Co. Ltd.'s (OTC:TKPYY) diabetes drug, Actos.

Actos (pioglitazone hydrochloride - 15mg, 30mg and 45mg tablets) is used for the treatment of type II diabetes in patients.

Due to the FDA's decision, Watson's Abbreviated New Drug Application (ANDA), which was filed in 2003, can now get delayed by up to six months. The company filed the lawsuit after the discussions with the FDA failed to resolve the dispute and ensure timely approval of the drug.

Watson stated that the FDA had improperly denied the company's shared exclusivity for Actos, in spite of the company complying with the FDA's requirements received from the latter regarding its Paragraph IV certification.

As per IMS Health, US sales of Actos amounted to $2.7 billion, for the twelve months ended May 31, 2012.

We note that Watson intended to launch generic Actos on August 17, 2012 based on the prior settlement agreement with Takeda on March 10, 2010. Watson believes it is entitled to share a 180-day period of generic marketing exclusivity under the provisions of the Hatch-Waxman Act.

However, Watson said that even if the FDA fails to approve its ANDA for generic Actos, it will still be able to achieve its full year 2012 guidance of $5.5 billion. It would result from recent favorable regulatory updates of other generic drugs along with improved condition in the US generics market.

Our Recommendation

We currently have a Neutral recommendation on Watson Pharma. The stock carries a Zacks #2 Rank (Buy rating) in the short run.

We expect new generic product launches over regular intervals to help drive the company's Global Generic segment sales which climbed 26% during second quarter 2012 to $995 million, driven by the generic launch of Pfizer Inc.'s (NYSE:PFE) Lipitor and Sanofi's (NYSE:SNY) Lovonex.

StanCorp Financial Stays Underperform

We retain our Underperform recommendation on StanCorp Financial Group Inc. (NYSE:SFG), following disappointing second quarter results. StanCorp Financial's second quarter earnings lagged the Zacks Consensus Estimate and the year-ago results as the quarter experienced higher benefit ratio in the Insurance Services segment, largely due to less favorable claims experience in the group long-term disability business. The top line also missed expectations.

In the first quarter as well, the segment posted higher benefit ratio. To note, both the quarters posted benefit ratio that exceeded the guided range of 80% to 82% for 2012. Also, the company now expects full-year benefit ratio to exceed its guided range, given the performance in the first half of the year and the persistently low interest rate environment.

However, StanCorp expects that with pricing actions on the long-term disability business accomplished and employment levels and wage growth returning to the historical levels, annual benefit ratio will also return to its historical range of 74% to 78%.

StanCorp's Asset Management segment, after posting robust earnings over the past couple of quarters, witnessed a decline for the fourth consecutive quarter. The fall was mainly attributable to lower administrative fee revenues due to a decline in retirement plan assets under administration.

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