Specialty Pharma: 5 Themes for 2012; 4 Best Stock Ideas

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Canaccord Genuity life sciences analyst Randall Stanicky called out five themes that will impact the specialty pharmaceutical sector along with his top picks for 2012. The themes are

(1) FDA changes this year (GDUFA [Generic Drug User Fee Act])

(2) Diversification as business models become more blended

(3) Exclusivity strategies by big pharma post Lipitor

(4) Generic growth 5-10 years out

(5) Strategies to drive launch penetration.

His top BUY rated stock ideas are the following:

Watson Pharmaceuticals (WPI): is now our top idea with a catalyst-heavy path and less crowded stock creating an attractive set-up here. We lower our EPS estimates mainly to reflect conservatism on Gx Lidoderm but still above Street through ’15 with 29% upside potential to our new $80 target.

Teva Pharmaceutical Industries (TEVA): still holds potential upside but many of the catalysts underpinning our thesis have played out and the stock is +27% since late Sept. low (vs S&P500 +13%). We now think a Copaxone court win is needed to hit our $52 target, which we expect. Look for support from EPS upside and a still unjustified P/E spread to big pharma.

Impax Laboratories (IPXL): is our top small-cap name with upside expected from H1/12 catalysts likely to reverse negative sentiment and growing focus on a more robust EPS story in 2013.

MAP Pharmaceuticals (MAPP): is our favorite catalyst-driven stock for those with risk appetite for material upside potential. We’d be BUYERS ahead of the March 26 PDUFA date for Levadex.

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