Piper Jaffray Gives Company Update On Watson Pharmaceuticals

Yesterday, detailed data from Watson Pharmaceuticals WPI and partner Columbia Labs' successful Phase III study of Prochieve (progesterone gel) was published in the journal Ultrasound in Obstetrics & Gynecology. The data revealed an advantage for Prochieve in terms of neo-natal morbidity and mortality, pointing to a compelling pharmaco-economic rationale for using the product. Piper Jaffray believes a $250M-$275M opportunity is reasonable, and possibly conservative. With at least mid-teens long-term EPS growth and a 2012 P/E of 11x, Piper continues to view WPI shares as attractive. Only 16% of women in the Prochieve study had a prior history of pre-term birth, whereas KV's Makena was tested exclusively in women with a prior pre-term delivery. As such, Piper Jaffray cautions against cross-study comparisons. Further, Piper Jaffray believes physicians will use these treatments in their respective indications, though it would not be surprised to see some obstetricians give women with a prior pre-term delivery the choice of Prochieve since it is a more convenient non-injectible option. Piper Jaffray has a $62 PT and Overweight rating on WPI WPI closed Wednesday at $58.36