Friday, June 30, 2006

Calls of Note Part 4

- Merrill Lynch is somewhat cautious on Medmmune (NASDAQ:MEDI) saying that although the CDC committee's recommendation for use of Merck's cervical cancer vaccine (Gardasil), improving MEDI's royalty revenue outlook from that drug, they believe the market is underestimating the negative impact of newly issued Synagis guidelines on sales.

Newly issued Synagis guidelines were clearly designed to limit use in 32-35 week preterm infants, which represent about 50% of sales. Smoking was eliminated as a risk factor, which we estimate will reduce eligible 32-35 week infants by 50%, but actual decline in use may be less. Also, new guidelines restrict Synagis doses per season to 5, which could adversely impact sales by an additional 1%.

Lower Synagis revenues more than offset higher Gardasil royalties, so firm's '06 EPS estimate falls to $0.22 from $0.32, '07 falls to $0.75 from $0.87, and '08 falls to $0.94 from $1.20.
Maintains NEUTRAL rating due to a break-up value of $35.

Notablecalls: I would not be surprised to see some pressure in MEDI.

- Cowen & Co comments on Tessera Tech (NASDAQ:TSRA) saying we are approaching a critical court event that will give the co a huge boost if TSRA prevails. On Aug 14, TSRA begins a 10 day jury trial to determine if Micron and Infineon are in violation of 4 key TSRA patents. If TSRA wins, they will add 25%+ share to the 40% of the DRAM industry they already cover (DDRII royalties) with Samsung & Hynix.

Firm further surmises that there are high probability incremental licensees (Freescale, Phillips etc.) who will wait for the trial outcome before signing with TSRA. Additionally, a TSRA win would significantly increase the odds of a successful resolution in its Jan 2008 case vs. Spansion, ST, & various Subcons. A win wouldbe huge given this likely ripple effect. Given the strong precedent (Sharp, TI, Samsung) they think the odds of a win are high (80%+?) and believe speculative investors ought to position to take advantage.

Notablecalls: Not actionable but good to know category.

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