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Riding on a strong growth momentum ahead of its second-quarter earnings release, the shares of Cadence Pharmaceuticals Inc. soared 7.1% to $7.86 on Jul 22, 2013.

The Zacks Rank #1 (Strong Buy) biopharmaceutical company has delivered positive earnings surprises consecutively for the last couple of quarters. In the first quarter of 2013, the company posted a surprise of 85.71%.

In the first quarter of 2013, Cadence Pharma reported net revenue of $23.6 million, up 195% year over year. Sales were also up 38.2% on a sequential basis. The sales growth was driven by a significant jump in sales of Ofirmev, which is Cadence Pharma’s proprietary intravenous formulation of acetaminophen. Ofirmev, launched in Jan 2012 in the US, is indicated to manage pain with adjunctive opioid analgesics as well as for the reduction of fever.

Cadence Pharma in-licensed the exclusive U.S. and Canadian rights to Ofirmev in 2006 from Bristol-Myers Squibb (BMY - Analyst Report). The drug is marketed by Bristol-Myers as Perfalgan in Europe and other parts of the world. In Feb 2013, Cadence further extended its agreement with Bristol-Myers Squibb through Dec 2018.

We expect Ofirmev to continue its encouraging performance in the second quarter of 2013 as well. Cadence Pharma increased its 2013 Ofirmev sales forecast to the range of $97 million to $103 million from the earlier estimated range of $94 million to $100 million following the first quarter 2013 results.

On a price-to-sales basis, Cadence Pharma is trading at 10.2x, reflecting a huge premium of 160.2% compared with the peer group average of 3.92x. On a price-to-book basis, the stock is also trading at a premium to the peer group average. However, given the company’s strong fundamentals, the premium valuation is justified.

Other companies like Jazz Pharmaceuticals (JAZZ - Analyst Report) and NPS Pharmaceuticals, Inc. (NPSP - Analyst Report) also look attractive with a Zacks Rank #1.

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