Thursday, August 09, 2007

Omrix Biopharma (NASDAQ:OMRI): Actionable call alert!

Several firms are out in defense of Omrix Biopharma (NASDAQ:OMRI) after the biosurgical and passive immunotherapy products maker posted a 71 percent fall in quarterly profit partly hurt by certain unrecognized and deferred revenue and lowered its total product sales view for 2007, pushing shares down 20 percent. The uncertainty related to future shipment of Intravenous Immunoglobulin (IVIG) to an European Union country, as well as related unrecognized revenue resulted in the company cutting its full-year product sales view.

Omrix said it was not certain as to when it could record the revenue or if it could even continue to sell the product in that country in 2007:

- Cowen notes Omrix reported 2Q results below estimates but they believe fundamentals remain fully intact for above average growth beginning in 2008. Two unpredictable, one-time events impaired 2Q sales gains. Important positive catalysts in 2H07 should bolster confidence in the firm's ability to execute its long-term growth strategy. Firm reiterates their Outperform rating and advises investors to use near-term weakness in the shares to build positions.

They expect any share weakness to be short lived as important milestones occur in the next six months. The PDUFA date for Thrombin is Sept. 6, and the company plans to report results from a small Phase I trial of its fibrin patch at an analyst meeting planned for October. Label expansion for Evicel for general surgery should be issued by Jan-08, bolstering sales potential. Finally they expect IVIG marketing partner FFF Enterprises to win FDA approval for IVIG in mid-2008, providing upside to estimates.

- CIBC notes they did not expect 2Q to miss this badly, but their fundamental view on OMRI is actually unchanged, and they feel the stock would be very appealing in the mid- 20s where it may open. The worst may well be over, and a few sizeable catalysts this year can drive both EPS and the stock a lot higher. Maintains Sector Outperformer and $43 tgt.

Firm notes mgmt confirmed a new VIG bidding in one EU country, with a decision coming in 4Q. They believe the potential deal size will be similar to last year's U.K. order of $30M (OMRI got 2/3 of the U.K. contract). The 2006 U.K. order added $0.50-plus to EPS, and CIBC has no VIG in estimates.

- Citigroup notes yet another issue - this time in IVIG - created a Q2 shortfall, reduced guidance for 2007, and should lead to a sharp correction in the stock price. While they are disappointed by another execution snafu - the core thesis of a big ramp in the Biosurgery business - still looks intact and they would stick with this story.

What's Next - FDA approval for stand-alone thrombin is slated for September 2007, the IVIG issue could get resolved, and a government tender for a high-margin VIG contract could create an unexpected catalyst in Q4:07. Hence, Citi expects the current negative sentiment to turn positive very soon and for the stock to recover quickly.

Assuming the stock opens at $24, the shares will be trading at 15x new 2008 EPS estimate of $1.51 (+135%), which is too big a penalty for the recent execution missteps. They would take advantage ahead of what should be much stronger results in 2H:07 and a string of high-profile product catalysts. Citi's revised $42 target price reflects their lowered EPS outlook for 2008 to account for lower IVIG sales, which now appears to be a worst case scenario. Maintains Buy.

Notablecalls: Oh my, this one's surely a bounce play. I must say I don't know a whole lot about OMRI or the markets it operates in but reading the defenses gives me goosebumps. This is the type of stuff that bounce plays are made of - stock down 20%+ on problems that at least seem s-t in nature, plus sizable catalysts ahead. Plus you have valuation supporting the story. Paying 15x for 100%+ grower is a joke, A JOKE!

I wish some gung-ho analyst downgraded it this AM, giving you guys decent fills early on. Grab it at $24 and be prepared to pay up! Actionable call alert!

1 comment:

Morning said...

Great bounce call on this!