Oppenheimer & Co. analyst Jeffrey Casdin on Friday said herated Centocor Inc. a "trading buy," sending the company'sshares up $1.50 to $12.
In a lengthy analysis, Casdin said that he has long estimatedthe downside risk in the stock at $20, plus or minus $5 pershare, if the FDA turned down Centoxin as a treatment forgram-negative sepsis. The FDA in April said the product iscurrently unapprovable. "That was the price at which we feltthe company could be sold in its distressed situation," he wrote.
Based on his analysis of the interactions between the FDA andthe Malvern, Pa., company, Casdin said he thought Centocor(NASDAQ:CNTO) would face no more than the usual kinds ofshare and bondholder liabilities companies normally face inthese situations.
Casdin wrote that he finds reason for hope.
If the FDA allows Centocor to conduct additional studies inpatients in shock with a defined presumption of gram-negativebacteremia, then Centocor would be testing its drug in thesubgroup with the best data in the original trial, said Casdin.This group's reduction in mortality at the end of 28 days was42 percent.
In addition, he said, if the FDA allows the use of historicalcontrols, Centocor could convert its compassionate-use programinto a trial and potentially get approval by about year-end. Ifthe agency wants a placebo-controlled trial, this would takeconsiderably longer.
At this point, Casdin said, the best scenario for Centocor wouldbe year-end approval and a co-promotion deal with a majordrug company involving Centoxin and some of the drugcompany's products for the infectious disease market.
The worst case would be shelving Centoxin, chopping all butessential overhead and looking for a buyer for the company.Under any scenario, Centocor will need substantial additionalcash. Casdin estimated Centocor has enough cash to last aboutsix quarters without a fire sale.
The company, meanwhile, has started reducing its $50 million-per-quarter burn rate. On Friday, Centocor said it plans to cutits workforce by 15 percent from its level of 1,500 in earlyApril.
Spokesman Richard Koenig said the company doesn't yet haveprojections for its burn rate. However, the company estimatesthat it will be profitable by the end of 1993 throughundetermined cuts in spending and increased sales.
Sales will come from European Centoxin sales, diagnostics salesand possibly U.S. Centoxin sales, Koenig said. The company's1991 sales were $44.3 million, of which Centoxin salesaccounted for $8.4 million and the rest was diagnostics. Thecompany had a net loss in 1991 of $195.6 million, or $5.72 pershare.
-- Karen Bernstein BioWorld Staff
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