Zacks Analyst Blog Highlights: Acergy S.A., Unisys, Computer Sciences, Alexza Pharmaceuticals and Transcept Pharma - Press Releases

For Immediate Release

Chicago, IL – July 15, 2010 – Zacks.com Analyst Blog features: Acergy S.A. (ACGY), Unisys Corp. (UIS), Computer Sciences (CSC), Alexza Pharmaceuticals (ALXA) and Transcept Pharma (TSPT).

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Here are highlights from Wednesday’s Analyst Blog:

Acergy Misses, but Stays Outperform

London-based oilfield contractor Acergy S.A. (ACGY) reported marginally weaker-than-expected second-quarter (ending May 31, 2010) results, reflecting weak margins and higher expenses. These factors were partially offset by good project execution skills and solid activity levels.

Earnings per ADR from continuing operations came in at 25 cents, just shy of the Zacks Consensus Estimate of 26 cents and below the prior-year profit of 40 cents.

Outlook

Management indicated that the medium-term business environment remain strong, underpinned by a more stable oil price.

The company anticipates more activity in the conventional West African market during the next few months. Acergy believes its substantial local presence will act as a competitive strength in the region.

In particular, Acergy is encouraged that some of the company’s relatively high-margin Sub-sea construction, Umbilicals, Risers, and Flowlines (SURF) activities in West Africa and Australia, which were delayed during 2009 due to macroeconomic concerns, are expected to come to market. However, given the size and complexity of these new major SURF projects, offshore installation is not expected to commence before 2011.

Acergy sees limited visibility in the North Sea, where projects are slow to come to award. Pricing environment for shorter-term work in the region also remains very competitive. In the Gulf of Mexico, following the tragic oil spill incident and the deepwater drilling ban invoked in the aftermath, projects that were expected to be awarded over next 12 months are likely to be delayed until 2011 or possibly later. However, Acergy has very limited exposure to the region and as such there is unlikely to be direct impact on its financial performance in short or medium-term.

Acergy reiterated that it expects revenue for fiscal year 2010 to be in line with 2009, while EBITDA margin is likely to be slightly lower.

Remains an Attractive Investment

Acergy is currently rated as Zacks #2 Rank (Buy), implying that the stock is expected to do better than the broader U.S. equity market over the next one to three months. This is supported by our long-term Outperform recommendation (6+ months time period). With a healthy backlog, high-quality client base, significant cash balances, and no near-term refinancing requirements, we view Acergy ADRs as an attractive investment.

Unisys Downgraded to Underperform

Last year was challenging for information technology (IT) company Unisys Corp. (UIS) amidst the acute recessionary environment. The economic downturn has adversely impacted technology spending. Global IT spending declined significantly in 2009. The credit crunch greatly impacted IT capital purchases, and most companies have trimmed their IT budgets. This in turn impacted its top line.

2010 will also be a tough year for Unisys as it works through an uncertain spending environment. Management is currently engaged in a multi-step strategy of reducing costs and focusing resources on high growth areas of the IT market. Although management is making progress in expanding margins, we remain cautiously optimistic of the pace of recovery in IT spending and the maturing of higher-margin legacy product sales and services.

Unisys aims at generating profitability and positive cash flow besides, strengthening its balance sheet in 2010. The recent cost-cutting measures adopted by management should boost the bottom-line but top-line growth looks difficult for the company.

The balance sheet of the company is highly leveraged. As of Mar 31, 2010, the company had $874.4 million of total long-term debt and $468.5 million of cash and equivalents. During the second quarter of 2009, the company launched private debt exchange offers to address $300 million of debt maturing in March 2010. Subsequently, Unisys completed the debt exchange offers and reduced its debt outstanding by approximately $130 million (about 12%).

The stock had taken a hit earlier due to the debt overhang and weak quarterly results. After recovering some of the lost ground in 2009, the stock is again going on a slide, as is evident from the decline in stock price in the last three months. In May, Unisys lost the Transportation Security Administration’s IT infrastructure program bid worth $489 million (over five years) to Computer Sciences (CSC).

Estimates have also gone down significantly in the last three months. The current 2010 EPS estimate is $1.41, down from $2.27 over the past 90 days. Consequently, we downgrade our rating on Unisys to Underperform from Neutral. Our Underperform rating is supported by the Zacks #5 Rank.

Alexza Offers Pipeline Update

On July 12, 2010, Alexza Pharmaceuticals (ALXA) announced, after completing its technology and portfolio review during the first half of 2010, that is has selected AZ-007 as the next candidate to move forward in clinical trials. Alexza is developing AZ-007 (Staccato zaleplon) for the treatment of insomnia in patients who have difficulty falling asleep, including those patients who awake in the middle of the night and have difficulty falling back asleep.

Zaleplon is a non-benzodiazepine hypnotic currently approved to treat insomnia marketed under the brand name Sonata. It is widely available as a generic. The product has a pharmacokinetic half-life of about one hour and is generally well tolerated in patients. Alexza has combined the technology attributes of the Staccato system with zaleplon in order to develop a product candidate with a specific profile for middle of the night (MOTN) insomnia.

Phase I Demonstrates Potential

In a Phase 1 clinical trial, AZ-007 delivered an IV-like pharmacokinetic (pk) profile with a median time to peak plasma concentration for the drug of 1.6 minutes. Pharmacodynamics (pd), measured as sedation assessed on a 100 mm visual analog scale, showed onset of effect as early as 2 minutes after dosing with AZ-007.

AZ-007 was dose-proportional across the four dosage strengths studied in this clinical trial, and was generally safe and well tolerated in this volunteer population. These are highly encouraging results. The pk/pd profile of AZ-007 looks superior to any approved insomnia drug we have seen, and is ideal for a MOTN indication.

A Significant Opportunity

We estimate that nearly 70 million American adults (30% prevalence rate) are affected by some form of insomnia or sleep disorder. This can be characterized as difficulty falling asleep, waking frequently during the night and not being able to return to sleep, waking up not feeling refreshed, or a combination of all three.

Approximately a third of insomnia patients report nocturnal awakenings with difficulty returning to sleep. In greater than 75% of these patients, there is no observed difficulty in falling asleep. Thus, existing medications that offer only sleep onset claims do little to solve the problem. Research shows that 35% of the general population reports awakening at least 3 nights per week. We see a significant void in the insomnia market for that 35% of the adult population that suffer from nocturnal awakenings.

It’s an attractive opportunity in our view, and one that is currently wide open. There are no prescription products on the market with an approved MOTN dosing. Transcept Pharma (TSPT) is in the process of satisfying an FDA complete response letter on Intermezzo. Intermezzo is a sublingual, rapid-acting dose of zolpidem, which we project will be on the market by the second half of 2011.

This market is clearly large enough to support both products. AZ-007 could compete effectively with Intermezzo for market share in this $500+ million category.

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