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An update has come out recently on Cerus Corporation (CERS), in which senior bio-technology analyst Gregory Aurand, CFA is restating his Hold rating on the company. We excerpted the following details:
'The company missed our third quarter top-line estimate due to the absence of development revenues and lower-than-expected government grants. The company expects to announce plans (possibly a spinout) of the immunotherapy business by year-end. Our target moves to $8.00. The loss per share was better than our forecast as management kept a lid on R&D expenditures, although management still expects a $14 million cash-burn from the immunotherapy business. The cash-burn year-to-date of $25 million is well below management's 2007 $42-million spend projection.
'Product revenues were essentially in-line with our expectations. New distribution agreements are enhancing the company's rollout plan for the INTERCEPT Blood System in different European regions. However, we believe the real growth driver longer-term for the company is the red blood cell program and a comprehensive pathogen inactivation process. The RBC Phase III trial is delayed until 2009 with a comprehensive pathogen inactivation program likely delayed until 2011 or later.
'Given a lack of synergies and increasing cash burn, the company is considering alternatives for the immunotherapy business. Given the potential to reduce R&D costs but increased uncertainty in the outlook with delays in the red blood cell program, we believe the stock is fairly valued at 40x a blend of our revised 2011 EPS estimate of $0.65, and an expected cost-related EPS improvement to $.92, discounted 40%.
'At the current price of $8.82, CERS trades at 7.6x 2008 expected revenues. Our revised $8.00 target is roughly equivalent to 6.9x 2008 revenues, which we believe is appropriate given near-term uncertainty and continued expected losses. Given the current valuation level, our rating is Hold.'
Read the full analyst report on CERS.
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