A timely response to the approvable letter will ensure launch of the drug by year-end. We note that the FDA did not seek additional trials for the approval of Zentase. Strong sales of Zentase coupled with the royalties on the sales of Cephalon's (CEPH) Amrix and GlaxoSmithKline Plc's (GSK) EUR-1048 will drive the company to profitability in 2009 and beyond.

Eurand is amongst a handful of biopharmaceutical companies with a diversified revenue stream. The company is on track to achieve profitability in 2009. Current price represents an attractive entry point. Therefore, we assign a Buy rating on its shares with a price target of $20.

The company has developed a broad portfolio of proprietary drug-formulation technologies, including four primary technology platforms and nine distinct technologies. The company utilizes these technologies to develop and expand its own internal pipeline and to secure additional co-development agreements with pharmaceutical and biopharmaceutical companies. In addition to Zentase, Eurand is also developing a pipeline of products both with collaboration partners and for its internal portfolio.

The company is in a strong financial position. In the second quarter of 2008, total revenues were $36.9 million, an increase of approximately 16% at constant currency rates compared with the second quarter of 2007. Product sales grew 16% at constant currency to $31.9 million.

HCP a Play on Healthcare Strength

HCP, Inc. (HCP) is a self-administered real estate investment trust (REIT), which invests in and leases directly or through joint venture healthcare facilities in over 40 states. The company had a solid 2nd quarter, reporting FFO [funds from operations] per share of $0.57 (excluding charges), $0.02 below our estimates.

Operations are holding up well in the company's core portfolio. The company has raised $1.3 billion this year through asset sales, equity issuance and mortgage debt. HCP used the proceeds to pay down its line of credit and bridge loan used to acquire the SEUSA portfolio. The company has done a successful job of de-levering and strengthening the balance sheet. We think health care will continue to outperform other sectors in 2008.

Based on 2008 FFO estimates HCP trades at an approximate 7% discount to sector averages. We expect the Slough portfolio acquisitions to be dilutive in the near term, although integration has been going smoothly, and the company now has some attractive development opportunities in high growth markets.

In addition, the Manor Care loan should be accretive to 2008 FFO. The yield is still above 5% (89% payout ratio), and the company is valued slightly above our NAV [net asset value] estimate. We like healthcare in a recessionary economy, and HCP, with a diversified asset, should trade at least in line with sector averages. We are setting out price target at 16.5x 2008 FFO estimates of $38.00 per share.