Biotech Values

[DewDiligence]

ENTA—Musings on Credit Suisse’s new $36 price target*:

Our FY'14, FY'15, and FY'16 EPS estimates are $1.18, $3.78, and $1.94 respectively due to housekeeping model changes.

In general, no experienced investor takes this kind of statement seriously. When the share price rises above an analyst’s prior price target, the analyst invariably responds by raising the price target, which requires tweaking the valuation model by making “housekeeping changes.” (You can’t have a Buy rating on a stock with a price target lower than the current share price!)

In this instance, however, Credit Suisse’s raised price target is entirely logical insofar as the ABBV/ENTA’s SAPHIRE-2 data are even more impressive than the SAPHIRE-1 data for the reasons mentioned in #msg-94817670.

In due course, CS—and other analysts who follow ENTA—will probably have to admit that their new price targets based on their projected ABT-450 royalties are still too low, and they will have to creep closer to my valuation model (#msg-92235183, #msg-92239448).

*See #msg-94825441 for the report summary.