Acorda Therapeutics Now a Sell

We downgrade Acorda Therapeutics, Inc. (ACOR - Snapshot Report) to Sell from Hold, as we believe the shares are significantly overvalued at the current level, and expectations for profitability and future cash flow are entirely too high. We believe alternative medications and a high side-effect profile will keep Fampridine-SR as a niche-use drug only. With the stock now trading at over $30, a market capitalization of nearly $1 billion, we see a period of basing and profit taking over the long catalyst-lacking summer.

The second phase III trial (MS-F204) of Fampridine-SR offered up positive results to improve the walking ability of patients with all four types of multiple sclerosis (MS). However, we remain unconvinced that the drug will see significant use upon approval. The next major catalyst for Acorda shares will be the presentations of the full MS-F204 data perhaps in September 2008, followed by the New Drug Application (NDA) filing early in 2009.

Our model assumes an approval and launch of Fampridine-SR in early 2010. We forecast profitability based on the ramp of Fampridine-SR in 2010. Our 2012 fully-taxed EPS forecast is $2.10. We arrive at our $22 target by applying a biotech-like 25x multiple (peer-average) on this figure and discounting back to present day at 20 percent.

Read the full analyst report on ACOR

Read the full analyst report on ACOR