Market Overview

PropThink: SciClone Reportedly Exploring Strategic Options


By David Moskowitz

SciClone Pharmaceuticals (NASDAQ: SCLN) started the day strong, as the company is being cited by dealReporter as exploring strategic options. According to sources, the publication is noting that the company may be exploring a potential sale to private equity firms, and potentially strategic buyers like Celgene (NASDAQ: CELG), Bristol-Myers (NYSE: BMY), Gilead (NASDAQ: GILD), and Novartis (NYSE: NVS). Shares of SCLN are extraordinarily cheap, trading at a big discount to U.S. specialty pharmaceutical companies, and even a discount to Chinese drug companies on an EV/2012 Sales basis. The company is profitable, has strong cash flow, and as a result has started buying back its own shares. In addition to being attractive from a financial standpoint, SCLN has built a strong brand and drug distribution engine in China and throughout Asia, which could be important for larger pharmaceutical companies, like those named above, to leverage with regard to their product portfolios.

Earlier this week, the company noted that the long-anticipated price decrease for lead product Zadaxin from the Chinese government will have a lower than anticipated impact on earnings, therefore, we continue to expect that SCLN is likely to raise its financial guidance when it reports 3Q 2012 earnings (see our prior story). Expect SCLN shares to remain strong, with potential that the Cowen analyst, who downgraded the shares in advance of the price decrease, returns to the table with an upgrade now that the "negative event" has turned into a positive catalyst. More importantly, SCLN's cheap valuation and strong franchise is being recognized by both financial and strategic buyers. The average analyst price target for SciClone is $7.75 based on fundamentals, and a take-out could be at a premium to that level.

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About PropThink

PropThink is an intelligence service that delivers long and short trading ideas to investors in the healthcare and life sciences sectors. Our focus is on identifying and analyzing technically-complicated companies and equities that are grossly over or under-valued. We offer daily market coverage, weekly feature stories, and a newsletter to investors who subscribe on PropThink.com. To learn more, follow us on Twitter or visit us at http://www.propthink.com.

Disclaimer:

You should assume that as of the publication date of any report or letter, PropThink, LLC and persons or entities with whom it has relation ships(collectively referred to as "PropThink") has a position in all stocks (and/or options of the stock) covered herein that is consistent with the position set forth in our research report. In connection with SCLN, PropThink has taken a long position and stands to realize significant gains if the price of SCLN appreciates. Following publication of any report or letter, PropThink intends to continue transacting in the securities covered herein, and we may be long, short, or neutral at any time hereafter regardless of our initial recommendation. To the best of our knowledge and belief, all information contained herein is accurate and reliable, and has been obtained from public sources we believe to be accurate and reliable, and not from company insiders or persons who have a relationship with company insiders. PropThink was not compensated to publish this article. Our full disclaimer is available at http://www.propthink.com/disclaimer.







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