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|Axcan Pharma, Inc. |(AXCA – NASDAQ) |$23.27 |

Note: All new or revised material since the last report is highlighted.

Reason for Report: Flash Update: No rtg chg; No tgt price chg;1 new broker comment; 1Q08 rslts – LIKELY FINAL REPORT (Due to takeover)

Prev. Ed.: January 22, 2008; Announced Financial Information for 1Q08

Brokers’ Recommendations:; Neutral: 50.0% (4 firms); Negative: 50.0% (4) Positive: 0% Prev. Ed.: 4; 4; 0

Brokers’ Target Price: $23.35 (↔ to the last report; 7 firms) Brokers’ Avg. Expected Return: 0.34%

Flash News Update, Opinion, Rating Changes

On January 31, 2008, AXCA reported its financial results for 1Q08.

1Q08 revenue was $92.9 million, a 17.9% Increase versus 1Q07.

Diluted net income per share in 1Q08 amounted to $0.39, versus $0.34 in 1Q07. The Digest predicted average was $0.35.

During 1Q08, Axcan announced that it had entered into an agreement for all the outstanding shares of Axcan to be acquired by an affiliate of TPG Capital in an all-cash transaction with a total value of approximately $1.3 billion. On January 25, 2008, the shareholders of the company voted in favour of the transaction, which is expected to close in the first quarter of calendar 2008.

One analyst (Thomas Weisel) dropped coverage on the stock.

FOR DETAILED CHANGES IN ANALYSTS OPINIONS, PLEASE SEE THE LAST SECTION OF THIS REPORT.

Recent Events [Note: not changed since last report; except where highlighted]

On January 21, 2008, AXCA announced financial information for 1Q08 and its revenue in 1Q08 was $93 million versus $78.8 million in 1Q07.

On January 10, 2008, AXCA announced the early termination of its waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, related to the proposed acquisition of Axcan by TPG Capital and its affiliates.

On December 20, 2007, AXCA announced that the Quebec Superior Court issued an interim order authorizing holding a special meeting of Axcan shareholders, at which shareholders will be asked to reconsider the previously-announced arrangement with TPG Capital and its affiliates. The special meeting will be held on January 25, 2008.

Overview [Note: not changed since last report]

Analysts have identified the following factors for evaluating the investment merits of AXCA:

|Key Positive Arguments |Key Negative Arguments. |

|AXCA has strong cash flow, which would help it in product acquisitions in the|AXCA lacks major revenue drivers, more so due to the failure of the |

|future. |international ITAX trial and poor execution in the core business over the |

| |past two years. |

|AXCA’s broad and a promising R&D pipeline make it a very promising name in |Greater-than-expected generic competition would lead to lower-than-forecast |

|this sector. |revenue. |

|The company’s sales force is widely spread out across its markets, making |The high wholesale inventory level might negatively impact revenue in the |

|market penetrate more effective. |future. |

|AXCA’s multi-drug pipeline with a balanced mix of short and long-term |AXCA relies heavily on in-licensing activity to build its pipeline. |

|opportunities dilutes the risk of drug development. | |

|AXCA’s lifecycle management initiatives would support the company’s existing | |

|franchise. | |

Based in Mont saint Hilaire, Quebec, Axcan Pharma, Inc. (AXCA) is a leading specialty pharmaceutical company that develops, manufactures, markets, and distributes a broad line of gastrointestinal (GI) products, primarily in North America and Europe. Through internal product development and synergistic acquisitions of products and companies, Axcan has built a leadership position in the North American gastroenterology market; more than 80% of the company's business is generated from North American sales. Currently, the company markets more than 40 GI products and dosage strengths worldwide for the treatment of symptoms in a number of gastrointestinal diseases and disorders such as inflammatory bowel disease, irritable bowel syndrome, cholestatic liver diseases, pancreatic diseases, esophageal cancer, and complications related to cystic fibrosis including several that hold a leading market position.

In addition to its marketing activities, Axcan carries out research and development of products – at an advanced stage of development – that it acquires or licenses from third parties. By combining its marketing expertise with its research and development experience, Axcan distinguishes itself from specialty pharmaceutical companies that focus solely on the distribution of products and offers potential licensors the prospect of rapidly expanding the market for their products. Within the last several years, Axcan has actively targeted and acquired products and companies in North America and Western Europe and primarily focuses its operations within these regions. The company’s website is .

Note: AXCA’s fiscal year ends on September 30; fiscal references do not coincide with the calendar.

December 3, 2007

Revenue [Note: not changed since last report]

Axcan's current products include Ultrase, Panzytrat, and Viokase for the treatment of certain gastrointestinal symptoms; Urso/Urso 250, Urso Forte/Urso DS, and Delursan for the treatment of certain cholestatic liver diseases; Salofalk and Canasa for the treatment of certain inflammatory bowel diseases; and Carafate/Sulcrate for the treatment of gastric duodenal ulcers.

According to the company, total revenue in 4Q07 was $92.5 million, compared with $72.3 million in 4Q06, an increase of 27.9%. Total revenue of $348.9 million in FY07 exceeded the top end of the company's previously-issued guidance range of $335-343 million. The FY06 total revenue was $292.3 million, which implies an increase of 19.4% y/y in FY07.

Based on its best estimate derived from information obtained from a number of its wholesalers in the United States, the company believes that changes in wholesaler inventory levels favorably impacted revenue by approximately $7.0 million in 4Q07. The company believes that increases in wholesaler inventory levels did not have a material impact on revenue in FY07.

According to Zacks Digest report, total revenue in 4Q07 was $92.5 million, compared with $71.9 million in 4Q06, an increase of 28.0% y/y. Total revenue in FY07 was $348.8 million versus $291.8 million in FY06, an increase of 19.4% y/y.

On January 21, 2008, AXCA announced revenue in 1Q08 of $93 million versus $78.8 million in 1Q07.

|Revenue ($M) |

|Positive |0% |

|Neutral |50% |

|Negative |50% |

|Avg. Target Price |$23.35 |

|Diogest High |$23.35 |

|Digest Low |$23.4 |

|NO of analyst with TP / Total |7/10 |

Capital Structure/Solvency/Cash Flow/Governance/Other [Note: not changed since last report]

On November 29, 2007, Axcan Pharma Inc. announced an agreement for Axcan to be acquired by TPG Capital and its affiliates in an all-cash transaction with a total value of approximately US$1.3 billion. Under the terms of the transaction, TPG Capital and its affiliates will acquire all of the common shares of Axcan for an offer price of $23.35 per common share. The purchase price represents a 28% premium over the average trading price of Axcan's common shares on November 28, 2007, the last trading day on the NASDAQ prior to this announcement. Axcan anticipates that the transaction will be completed in the first quarter of calendar 2008. The Board of Directors of Axcan unanimously approved the agreement and urged shareholders to vote for the offer. One firm (Blackmont) feels this acquisition by a private equity group is a good strategic move. Once acquired, AXCA management will not have to worry about quarter to quarter financial performance and will be able to instead focus on long-term growth.

On October 1, 2007, Axcan entered into an exclusive license and development agreement with Cellerix SL (Cellerix) of Spain, for the North American (United States, Canada and Mexico) rights to Cx401, an innovative biological product in development for the treatment of perianal fistulas. Under the terms of the agreement, Axcan made a US$10 million upfront payment to Cellerix, plus regulatory milestone payments that could total up to US $30 million. Furthermore, Axcan will pay scaled royalties based on the net sales of Cx401. Axcan has also agreed to make an equity investment of up to US $5 million in Cellerix, if Cellerix completes its initial public offering within 3 years of the effective date of the agreement. One firm (Merrill) believes Cx401 is one of the products with higher R&D spending given AXCA's relatively lean pipeline.

December 3, 2007

Potentially Severe Problems [Note: not changed since last report]

The major problems for AXCA include (1) dependence on business development – Axcan relies heavily on in-licensing activity to build its pipeline (does not have an internal drug discovery function) and (2) product liability.

December 3, 2007

Long-Term Growth [Note: not changed since last report]

The long-term growth for AXCA depends on the successful completion of an accretive product acquisition. Management has stated the desire to acquire a product within the established therapeutic areas of gastroenterology (GI) and endocrinology. According to most analysts, acquiring a drug with a suitable product profile, if accretive, could add one to two years of positive momentum to Axcan’s financials. This could help to tide over the current difficulties with little in the product pipeline to drive growth. Simultaneously, it will also be important to acquire earlier-stage products so that in the future, growth rates can be sustained with products arriving to the market on a continuing basis. This would enable Axcan to change from a sales and marketing company to a more fully vertically integrated company.

Axcan’s development pipeline remains solid. Moreover, Ultrase and Viokase are likely to see fewer competitors in FY08, as the FDA’s demand for full NDAs for these products may see some generics exit the market. With competitors off the market, the recently-launched Pylera will get the full attention of the sales force.

December 3, 2007

Upcoming Events [Note: not changed since last report]

|Date |Event |Drug |

|April 2008 |Receive NDA approval |Ultrase and Viokase |

Individual Analyst Opinions [Note: This section has been updated.]

POSITIVE RATINGS

NONE

NEUTRAL RATINGS

Punk, Ziegel – Market Perform (target price: $23.35) – November 30, 2007. INVESTMENT SUMMARY – The firm expects generic competition for Urso and Canasa (which comprise 40% of AXCA’s revenue) and expects the Pylera launch to be weak. The firm apprehends there is only limited upside to Ultrase revenue and that the pipeline remains weak. The firm also anticipates that the company’s business development efforts would remain disappointing.

BMO Capital – Market Perform (target price: $23.35) – December 21, 2007. INVESTMENT SUMMARY –The firm believes the stock price already factors in the acquisition. It also feels a competing bid for the company is unlikely.

CIBC – Sector Performer (target price: $23.35) – November 29, 2007: The firm increased the target price from $21 to $23.35. INVESTMENT SUMMARY – The firm sees little risk of the deal not closing at $23.35 per share, but cannot rule out the possibility of competing bids by strategic players and/or other private equity players.

RBC Cap. – Sector Perform (target price – $23.35) – January 31, 2008: The firm reiterated the rating. INVESTMENT SUMMARY – The firm feels that Axcan continues to execute well on sales and marketing.

NEGATIVE RATINGS

Blackmont – Tender (target price: $23.35) – November 30, 2007: The firm decreased the target price from $24 to $23.35 and downgraded the stock from Buy to Tender. INVESTMENT SUMMARY – The firm believes the company's pipeline offers little near-term growth potential and growing through acquisition would be expensive and dilutive. The firm believes that Axcan is at a turning point and would have to consider new acquisitions to get to the next level. The firm believes the transaction with TPG Capital is a good strategic move.

Dundee – Tender (target price: $23.35) – November 29, 2007: The firm increased the target price from $19 to $23.35 and downgraded the stock from Market Neutral to Tender. INVESTMENT SUMMARY – The firm feels there is a small to moderate likelihood of a higher bid from another party.

National Bank Financial – Tender – January 11, 2007: The firm reiterated the rating. INVESTMENT SUMMARY – The firm feels AXCA is a take out candidate due to its robust cash flow and underleveraged balance sheet.

TD Newcrest – Tender (target price: $23.35) – November 29, 2007: The firm decreased the target price from $19 to $23.35 and downgraded the stock from Hold to Tender. INVESTMENT SUMMARY – The firm believes that Axcan in at the cusp of a difficult transition period without the benefit of a clear organic growth engine or good acquisition prospects. Its valuation multiples will contract in 2008 in the firm’s view.

NOT RATED

Merrill – November 29, 2007. INVESTMENT SUMMARY – The firm feels that due to the acquisition announcement, the stock is no longer trading on fundamentals.

DROPPED COVERAGE

Thomas Weisel – February 14, 2008. INVESTMENT SUMMARY – The firm dropped coverage on the stock.

Research Associate: Madhu Goyal

Copy Editor: Ian Madsen, CFA

Content Ed.: Kinjel Shah

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February 19, 2008

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Editor: Kinjel Shah, C.A.

Sr. Ed.: Ian Madsen, CFA; imadsen@; 1-800-767-3771, x9417

111 N. Canal Street, Suite 1101 ● Chicago, IL 60606

Zacks Research Digest

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