Upgrading Oscient Pharma to a Buy

Oscient Pharmaceuticals Corporation (OSCI) is a commercial-stage biopharmaceutical company focused on the selling and marketing of products to community-based primary care physicians. The company's core focus is on cardiovascular/metabolic and respiratory diseases.

Oscient currently has two marketed products in its portfolio, Antara and Factive. We believe the Oscient sales force has done a commendable job in driving sales for both products despite the intense competition being faced by both.

We are pleased with the company's success in driving sales for both Antara and Factive. We are especially impressed with the company's progress in driving prescription growth and increasing market share for Antara. Oscient acquired Antara in August 2006, at which time the trailing 12-month revenues for the product were $35 million. In the 16 months since the product was acquired, Oscient recorded Antara sales of $75 million. We expect Antara to continue growing at an impressive rate and the product should continue contributing significantly to total revenues.

Oscient undertook several initiatives in 2007 to accelerate Antara's growth trajectory - the product benefited from the realignment of the sales force and the initiation of new promotional and physician awareness programs. These initiatives should continue driving sales and we expect Antara revenues to exceed $80 million in 2008.

Oscient is currently looking to bring a third product on board. We think this makes sense as a third product will bring in an additional source of revenue and ensure the optimum utilization of the sales force. The company is looking for a product that will fit well within its existing product portfolio.

We expect an announcement in this regard in 2008. Oscient is also seeking to out-license, co-develop or sell its rights to Ramoplanin, and is in discussions with potential partners. The monetization of this asset will be a major positive for the company.

We believe the stock is undervalued at current levels, and we upgrade it to Buy with a $4 price target. Upcoming catalysts could be in the form of announcements regarding the in-licensing of a third product or the signing of a partnership deal for pipeline candidate Ramoplanin.

Arpita Dutt contributed to this report.

Fair Value on First Advantage

We maintain our Hold rating on shares of First Advantage Corporation (FADV) following the release of Q4 financial results. We believe the shares of FADV are appropriately valued near current levels. The shares of FADV are currently trading at a P/E multiple of 14x estimated 2008 EPS. We believe that the current multiple is reasonable.

After the close of the market on February 20, 2008, First Advantage announced the fourth quarter results for the fiscal year 2007. The company reported fourth quarter EPS from continuing operations of $1.30 per share. This total includes a $0.99 per share investment gain related to the sale of common stock of DealerTrack Holdings Inc. (TRAK). Excluding this gain, earnings from continuing operations were $0.31 per share, versus $0.23 in the year-ago period. The results were $0.07 above our estimate.

We believe the shares of First Advantage Corporation are appropriately valued near current levels. The shares of FADV are currently trading at a P/E multiple of approximately 14x our 2008 EPS estimate. We note that ChoicePoint Inc. (CPE), the company's closest publicly traded peer, is currently trading at approximately 18x consensus estimated 2008 EPS.