Insmed Inc (INSM)

[ED20332]

A bumpy ride going foward for TRCA


A Second Look: Tercica Inc.
Thursday March 8, 4:13 pm ET
Shares of Tercica Fall Following Previous Sharp Gains on Heels of Legal Settlement


NEW YORK (AP) -- Shares of drug maker Tercica Inc. reversed course Thursday, after marking big gains a day prior on news of a legal settlement with rival drug maker Insmed Inc.
The stock fell 57 cents, or 9.7 percent, to close at $5.31 on the Nasdaq Stock Market. Shares gained 20 percent on Wednesday and have traded in a 52-week range of $2.92 to $7.94.

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Insmed, as part of the settlement with Tercica and Genentech Inc., agreed to stop marketing Iplex, which treats growth disorders. That company had been sued over patent issues for its marketing of the drug.

Friedman, Billings, Ramsey analyst Jim Reddoch downgraded Tercica to "Market Perform" from "Outperform" and moved the price target to $6 from $7, saying the removal of the Iplex issue amounted to a positive, but only for the short term. Now Tercica must look to Increlex, also a growth hormone deficiency treatment, as the next driver for its shares.

"The current market opportunity -- the severe population -- looks limiting, and there is risk that Increlex misses Wall Street revenue estimates," Reddoch wrote in a note to investors.

Iplex's absence from the market should add between $1 million and $2 million in annual sales to Increlex's $2 million to $3 million in annual sales, he estimated. The risk is that Increlex misses Wall Street revenue estimates which ramp up to $24 million in 2007, he said. Tercica said it expects Increlex revenue of about $7 million to $8 million in 2007.

"""""He lowered U.S. sales estimates for the next six years, citing the difficulty the drug has had moving from the market for severe patients into non-severe patients. Also, the company expects to operate at a loss into 2010, he said.""""""""&q uot;"