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The Zacks Analyst Blog Highlights: AstraZeneca, Teva Pharmaceuticals, Mylan, Dr Reddy's Laboratories and POSCO

AZN TEVA MYL RDY PKX

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For Immediate Release

Chicago, IL – April 2, 2012 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include AstraZeneca ( (AZN - Analyst Report), Teva Pharmaceuticals Limited (TEVA - Analyst Report), Mylan Inc. (MYL - Analyst Report), Dr Reddy's Laboratories ( (RDY - Analyst Report) and POSCO ( (PKX - Analyst Report).

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Here are highlights from Friday’s Analyst Blog:

U.S. Court Rejects AstraZeneca’s Case

Recently, AstraZeneca ( (AZN - Analyst Report) announced that US District Court for the District of Columbia has dismissed the lawsuit filed by the company against the US Food and Drug Administration (FDA).

AstraZeneca had taken legal action against the FDA, challenging the agency’s decision to reject AstraZeneca’s Citizen Petitions.

The Citizen Petitions were filed by the company for Seroquel (quetiapine fumarate) and Seroquel XR. The Citizen Petitions were filed to bar the FDA from approving any generic versions of the drug that do not include warnings related to hyperglycemia and suicidality in its label. With this move, AstraZeneca was looking to delay the launch of generic versions of Seroquel considering the company has marketing exclusivity for the data associated with the hyperglycemia warning till December 2, 2012.

Meanwhile, the UK High Court has ruled against the formulation patent protecting Seroquel XR and rendered it invalid. Seroquel XR is marketed as Seroquel XL in the UK.

Teva UK Limited and Teva Pharmaceuticals Limited (TEVA - Analyst Report) had challenged AstraZeneca’s Seroquel XR patent in December 2010. Similar challenges were made by Accord Healthcare Limited, Intas Pharmaceuticals Limited, Hexal AG and Sandoz Ltd. in March and April 2011. We note that the patent covering the formulation of Seroquel XR expires in 2017 in both the EU and the US.

In contrast to this decision, on March 7, 2012, the District Court in The Hague, Netherlands, ruled in favor of AstraZeneca and found Seroquel XR’s formulation patent to be valid. The company is engaged in several other lawsuits related to Seroquel XR’s patent.

Mylan Inc. (MYL - Analyst Report), Dr Reddy's Laboratories ( (RDY - Analyst Report) and Teva have launched their generic version of Seroquel in late March. The Seroquel franchise generated sales of $5.8 billion in 2011. The loss of patent protection and entry of generic drugs in the market will hit AstraZeneca’s topline.

Neutral on AstraZeneca

We currently have a Neutral recommendation on AstraZeneca. The stock carries a Zacks #3 Rank (Hold rating) in the short run. Even though we are encouraged by the company’s focus on the high-potential emerging markets, we remain concerned about the generic competition faced by its key products. In 2011, the company lost revenues worth almost $2 billion to generic competition.

The company is looking to drive the bottom-line through cost-cutting initiatives and share buybacks. The weak late-stage pipeline coupled with the slow Brilinta uptake also bothers us.

POSCO Downgraded to Underperform

We recently downgraded our recommendation on the South Korean steelmaker POSCO ( (PKX - Analyst Report), from Neutral to Underperform.

The company, considered to be the third largest steelmaker on the basis of output, failed to impress the market which witnessed a fall in the company’s ADR prices, post the release of the fiscal year 2011 financial results.

The company posted roughly a 12% decline in its net earnings in 2011, despite registering revenue growth of 44%. Its margins weakened as higher raw material costs were not fully reflected in the sales price. Further, in 2012, coking coal spot prices are expected to remain flat while limited increase is likely in iron ore prices.

Considering the broader perspective, we believe POSCO remains in an advantageous position to leverage benefits from the growing steel demand both in the global and domestic markets. Also, efforts are being made to expand operations in the fast growing markets and industries.

In 2011, facility expansion and sales increase led to a 2% growth in the company’s domestic market share to 41%. Moreover, POSCO’s investment in a graphene making company and development of new steel for electric vehicles would probably open up new avenues of growth for POSCO.

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