CHICAGO, Aug. 15, 2012 /PRNewswire/ -- Zacks Equity Research highlights Central Garden & Pet Company (Nasdaq:CENT) as the Bull of the Day and Tessera Technologies, Inc. (Nasdaq:TSRA) as the Bear of the Day. In addition, Zacks Equity Research provides analysis onMylan Inc. (Nasdaq:MYL), Teva Pharmaceutical (NYSE:TEVA) and Par Pharmaceutical Companies Inc. (NYSE:PRX).
Central Garden & Pet Company's (Nasdaq:CENT) third-quarter 2012 earnings of $0.47 per share came in line with the Zacks Consensus Estimate, and rose 51.6% from the prior-year quarter on the back of increased marketing efforts, brand-building initiatives, and product innovation that helped drive consumer demand. Total revenue rose 10% to $533.8 million, and beat the Zacks Consensus Estimate of $506 million.
Central Garden & Pet intends to transform itself into an integrated, multi-brand company. Going forward, the company's primary focus is to contain costs, improve operating efficiencies and augment revenue growth potentiality. Gross margin expanded 300 basis points to 33.8%, whereas operating margin increased 160 basis points to 9.2% during the quarter.
The stock is trading at a premium to the industry average based on our forward fiscal 2012 earnings estimate, but at a discount based on forward fiscal 2013. Our target price of $11.00, 19.0X 2012 EPS, reflects this our recommendation upgrade from Neutral to Outperform.
Tessera Technologies, Inc. (Nasdaq:TSRA) is a provider of back-end technology for semiconductor manufacturing. Its technology enables miniaturization of electronic goods, which is a driver of IC sales in the market today. However, protection of intellectual property (IP) for a company this small is a challenge, as are the inherent pricing pressures in the sluggish DRAM market.
Tessera's near-term revenues are at risk. First, Micron, a major customer, was due to renew its license in May this year, but there is still no news that this has in fact been done. Tessera is also in legal battles with other big customers, such as Amkor and Powertech.
Additionally, the shares are trading at a significant premium (115.4%) to the peer group based on our estimates for 2013, while historically, the maximum premium has been just 13.5%. Therefore, despite the significantly higher earnings power, we consider investment in the shares risky. We therefore have an Underperform rating on TSRA shares, supported by a target price of $13.00 (37.1X P/E based on 2013 earnings estimate).
Mylan Inc. (Nasdaq:MYL) recently announced that it has launched its generic version of Noven Therapeutics' Lithobid (lithium carbonate) extended release 450 mg tablets after receiving final approval from the US Food and Drug Administration (FDA).
Lithobid is approved for manic episodes associated with manic depressive illness. According to IMS Health, lithium carbonate tablets, 450 mg, generated US revenues of approximately $15.2 million for the 12 months ending June 30, 2012.
Earlier this year, Mylan had received FDA approval for its generic version of Lithobid extended-release 300 mg tablets. The drug is approved as a maintenance therapy for bipolar disorder patients in order to reduce the frequency and intensity of manic episodes. Mylan started shipments of the drug for the said indication.
In addition to launching its generic version of Lithobid, Mylan's generic version of Teva Pharmaceutical's (NYSE:TEVA) Provigil (modafinil - 100 mg and 200 mg), was approved by the FDA. Provigil is approved for improving wakefulness in adult patients with excessive sleepiness associated with narcolepsy, obstructive sleep apnea/hyponea syndrome and shift work sleep disorder.
In June this year, Mylan had resolved all disputes with Teva regarding the litigation filed by the former in the District of Columbia federal court against the FDA concerning the company's ANDA for modafinil tablets. We note that Teva alone was entitled to the180-day exclusivity of generic Provigil as it was the first-to-file.
As per the terms of the agreement with Teva, Mylan was granted permission for the launch of its generic version before the expiration of Teva's 180-day marketing exclusivity period.
Currently, Par Pharmaceutical Companies Inc. (NYSE:PRX) also markets the generic version of Teva's Provigil in the US.
According to IMS Health data, modafinil tablets 100mg and 200 mg generated US revenues of approximately $1.3 billion for the 12 months ending June 30, 2012.
As of August 10, 2012, Mylan had 166 ANDAs pending FDA clearance, targeting $78.4 billion in branded sales annually. Mylan believes that about 35 of these pending ANDAs are first-to-file opportunities, representing approximately $25.1 billion in branded sales. The revenue figures are as per IMS Health for the 12 months ending December 31, 2011.
We are encouraged by Mylan's geographic reach and product depth along with a robust generic product pipeline. However, we remain concerned about the company's lackluster performance in the Europe, Middle East and Africa (EMEA) region. Additionally, with most large branded drugs due to lose patent exclusivity within the 2017-2018 period, we have little visibility on the growth prospects of generic companies like Mylan beyond that timeframe.
Thus, we prefer to remain on the sidelines and have a Neutral recommendation on Mylan. The stock carries a Zacks #2 Rank (Buy rating) in the short term.
Every day, the analysts at Zacks Equity Research select two stocks that are likely to outperform (Bull) or underperform (Bear) the markets over the next 3-6 months.
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