Barron’s analyst Johanna Bennett sees Cephalon rising:

a. In an environment that has thwarted many drug makers’ attempts to introduce new products, Cephalon has launched two new drugs that could help reverse last year’s falling profits. And it aims to launch a third drug in 2009.

b. Cephalon’s multiple still looks cheap, offering backers the opportunity for more gains if the company can deliver robust profit growth.

c. Their stated goal is annual earnings growth of 15% to 20% over the next few years, which makes the stock very compelling; at this valuation, in this market, it’s still very compelling.

d. Today, Cephalon has its own pipeline with seven drugs in various stages of development, including five cancer therapies.

e. Cephalon looks cheap now, fetching 14.6 times forward profits, a 26% discount to the biotechnology industry, and a slight discount to its projected annual long-term growth rate.

f. Still, turnaround stories can be risky. Cephalon’s future hinges on delivering profit growth. If Treanda and Amrix sales flounder, or if Nuvigil gets delayed, the stock will suffer.

CONCLUSION:

So with new drugs driving sales and profits, Cephalon’s story should have a happy ending.

Track Johanna’s picks at:

http://trackthepros.com/categories.php?category_id=632