We continue to rate COGO a Hold with a six-month price target of $12 based on the company selling between 16.4x and 16.8x our 2008 earnings estimate, and we believe this is the fair value of the stock with all the positive news regarding the company slated to come in steadily over the next six months.
Barriers for Barrier Therapeutics
Barrier Therapeutics, Inc. (BTRX) is a biopharmaceutical company focused on the discovery, development, and commercialization of pharmaceutical products in the field of dermatology. Although the company launched two new products (Vusion and Xolegel) in 2006, revenue contribution from these products will not be sufficient to drive Barrier to profitability in the near future. We believe that the main potential for the company lies with Hyphanox, and we expect to see phase III data on this candidate later this year.
This year should be an eventful year for Barrier as the company will be presenting data on most of its pipeline candidates. Partnership deals for Pramiconazole and Hyphanox would help restore investor confidence in the company. In the mean-time, we prefer remaining on the sidelines.
Additional news flow on other late-stage products, as well as updates on the ramp-up of Vusion and Xolegel, will keep the stock volatile in the near-term. We expect to see data on several pipeline candidates in 2008. The most significant data presentation will come towards the end of this year from the Hyphanox phase III trial.
The company does have two other drugs with strong potential -- Rambazole and Pramiconazole -- in its pipeline, but drug development is a risky business. Positive phase II results on these candidates should help the company strike suitable partnership deals for ex-North American territories. But it is difficult to value BTRX shares, given its little revenue and negative EPS.
The company provided financial guidance for 2008. While the revenue guidance was in-line with our expectations, our net loss estimate was higher than the guidance provided by the company. We have adjusted our model and are now forecasting a net loss of $0.86 per diluted share (excluding FAS 123R). We believe that BTRX shares offer opportunity later in the decade, as sales of Xolegel and Vusion begin to ramp.
Additionally, as the pipeline progresses, we see the potential to post an upside to our current sales forecasts. Unfortunately, we see the company posting negative EPS through 2010, and believe investors would do better to hold-off until visibility on the company s top-line growth increases. After considering all these factors we maintain our Hold rating with a target price of $4.
Marlin Business Services a Sell
Marlin Business Services' (MRLN) 4Q07 earnings of $0.25 per share were substantially below the consensus as well as our estimates. New originations were down 15.8% year-over-year. While the growth in average net investment leases was good, it was more than offset by severe margin compression and higher loss provisions.
We suspect the weakening economy will continue to impact the new originations, and the delinquencies will continue to rise through 2008.
