Lowering Acergy Estimates

We have lowered our 2008 EPS estimate ($1.48 vs. $1.67) following Acergy S.A.'s (ACGY) weaker-than-expected fourth quarter 2007 results. However, the company experienced a healthy revenue growth of 23% during the quarter, driven by increased activity levels in West Africa and South America.

For the full year, revenue increased by 25% and management is guiding towards 2008 growth rate of over 12%. Total backlog was up 23% from the year-earlier level to approximately $3.2 billion. London-based Acergy, previously known as Stolt Offshore S.A. (SOSA), is a leading oilfield contractor engaged in the designing, procurement, building, installation and servicing of a range of offshore surface and sub-surface equipment for the oil and gas industry.

Acergy anticipates its revenue for fiscal 2008 to increase by over 12% to about $3 billion. ACGY plans to spend approximately $250 million on capex in 2008, slightly up from $246 million in fiscal year 2007. Of this, about $120 million will go towards maintenance of existing levels and the remaining $130 million will support growth initiatives. We, however, believe that the stock's current valuation already reflects all the positives concerning the company's strong cyclical leverage and revenue growth prospects.

Therefore, we see limited upside from current levels and maintain our Hold recommendation. In spite of some progress on the project execution front, we remain cautious on the company's project execution skills and the long-term sustainability of the recent margin gains given rising costs pressures. The stock is currently trading at a premium to its peer group based on most conventional valuation metrics, which continue to keep us on the sidelines.

Visibility Low at Trimeris

Trimeris, Inc. (TRMS) develops a new class of therapeutic agents for the treatment of viral diseases based on its fusion inhibition technology that blocks viral entry into host cells. We are concerned about the decline in the U.S. sales of Fuzeon. Additionally, withdrawal of the sNDA for Biojector 2000 together with approvals of competitors Selzentry and Isentress are expected to adversely impact Fuzeon sales going forward.

The recent collaboration amendment with Roche and its management change also cast a shadow on the company's future. At this point, it's very difficult to value the stock. We believe qualitative factors prevail currently. With over $69 million in cash and cash equivalent at the end of 2007 (or $3 per share), we are disappointed to see the company not utilizing its cash reserves to in-license / acquire additional clinical candidates.

Hence, we maintain our Sell rating on Trimeris with a $5 price target, given the lack of visibility on the company's long-term growth prospects. Our $5 price target corresponds to a P/E ratio of 6.3x to our 2010 EPS of $1.24, discounted back at 25 per cent for two years. This is a huge discount to biotech peers, but it is warranted due to the recent corporate developments and changes in the competitive landscape.

Emageon Needs to Execute

We lowered our FY08 revenue and EPS estimates on Emageon, Inc. (EMAG) to within the initial guidance and initiated FY09 estimates. Guidance now only reflects organic growth. EMAG is now operating in a mature large hospital PACS market. To help offset this slower growth, EMAG launched in Q207 its new RadSuite Express solution into the small hospital PACS market.

The company is also making necessary R&D investment to compete successfully in the replacement market. At its current price of $1.99 per share, EMAG is trading at 0.5x our current fiscal year revenue estimate of $88 million, which is at a discount to the 1.5x group average multiple, 2.1x industry mean multiple, and 1.8 industry median multiple. We believe at this stage most of EMAG's declining sales bookings and revenue expectations have been factored into the stock price.

In a mature large hospital PACS market, EMAG needs to execute on initiatives to compete successfully in the replacement market and complete suitable acquisitions to resume a strong growth rate. We believe the stock is appropriately valued at a price-to-revenue multiple that is at a discount to the group average and industry mean and median. Our price target moves to $2.25. Our price target is based on a price-to-revenue multiple of roughly 0.6x FY08 revenue estimate.

Dynavax Downgraded to Hold

Dynavax Technologies Corporation (DVAX) is a biopharmaceutical company focused on drug development for the treatment and prevention of various infectious and inflammatory diseases.