Alpharma, Inc. (ALO)

TrackZacks (70.49) Submitted: 12/18/07 6:54 PM : Start Price: $20.02 ALO Score: -92.75

Alpharma Now a Sell

Posted Tue Dec 18, 04:06 pm ET

Trading at a very high P/E ratio is specialty pharmaceuticals company Alpharma, Inc. (ALO). Zacks senior drug industry analyst Jason Napodano, CFA explains here why shares should come down to the mid-teens within the next six months:

"Alpharma, Inc. is a pharmaceutical company with operations in human and animal pharmaceuticals. With the sale of the generics business, Alpharma is focusing on establishing itself as a specialty pharmaceuticals company. We expect 2008 to be another transitional year for the company with earnings declining significantly, mainly due to increased SG&A spend related to the launch of Flector Patch.

"In the absence of any potential catalysts, investor focus will remain on the launch and acceptance of Flector Patch. Although we expect earnings to rebound in 2009, we believe that the shares will remain under pressure over the coming quarters as the company works on maintaining Kadian growth and on ramping up Flector Patch sales.

"Alpharma shares are currently trading at 49.2x our estimated calendar year 2008 EPS of $0.40. We believe the shares are over-valued at current levels. We rate the stock a Sell with a $15.50 price target. Our price target is based on 23.8x our 2009 EPS estimate."

Read the full analyst report on ALO.

http://register.zacks.com/ucd/step1.php?ALERT=FOOL_ZER&d_alert=ZER_CONF&t=alo&ADID=FOOL_ZERFEED

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