Zacks Analyst Blog Highlights: Cell Therapeutics, Novartis, ZOLL Medical Corp. and Medtronic

Business Wire, Jan 17, 2008

CHICAGO -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Cell Therapeutics, Inc. (Nasdaq: CTIC), Novartis (NYSE: NVS), ZOLL Medical Corp. (Nasdaq: ZOLL) and Medtronic (NYSE: MDT).

See the latest posts to the Analyst Blog by visiting: http://at.zacks.com/?id=2673

Here are highlights from Wednesday's Analyst Blog:

Buy Cell Therapeutics

Cell Therapeutics, Inc. (Nasdaq: CTIC) develops, acquires, and commercializes novel treatments for cancer. Recent acquisition of Zevalin should generate revenue for the company and prepare the company for the future launch of other cancer products. Two pipeline products, Xyotax and Pixantrone, account for the late-stage oncology focus. We are optimistic about Cell Therapeutics' future, and believe the shares are attractive at the current level.

In September 2006, Cell Therapeutics entered into a partnership agreement with Novartis (NYSE: NVS) for Xyotax. The deal included as much as $270 million registration and sales milestone payment to CTIC and $15 million equity investment. The agreement also provided Novartis the option to develop and commercialize Pixantrone based on agreed terms.

If Novartis exercises its option on Pixantrone, it would pay CTIC a $7.5 million fee and up to $104 million in registration and sales related milestones. Given the current low stock price, we believe the market is significantly discounting the possibility that Xyotax or Pixantrone receives U.S. Food and Drug Administration (FDA) approval.

We believe that most of the risks have been factored into the current share price and we would be buyers of the stock given our belief that Xyotax and Pixantrone will be on the market in 2009. In our view, the street is overly pessimistic on the development programs for Xyotax and Pixantrone. We continue to rate the stock a Buy, with a price target of $6.

ZOLL Trading In-line

ZOLL Medical Corp. (Nasdaq: ZOLL) reported Q4 EPS that beat our estimate by $0.04 on revenue that also exceeded our forecast. Management increased its FY08 revenue growth guidance. We increased our FY08 revenue estimate. As in FY07, management expects operating cost controls to again support earnings growth in FY08 and sees potential for more upside from the mishap with Medtronic's (NYSE: MDT) external defibrillators.

The earnings outlook over the long-term remains uncertain due to the company's reliance on cost controls to drive significant growth. As in fiscal 2007, management again expects operating cost controls to support earnings growth for FY08.

Sales for the newer products (E Series and AED Pro) continue to grow. AutoPulse sales are accelerating and North American hospital sales excluding military sales have rebounded in Q3 of FY07. Military sales that expanded to include other government sales are expected to support higher North American hospital sales from fiscal 2008 onward. The shipment of the R Series that started in the fiscal 2007 second quarter has already been helping to boost North American hospital sales.

Management sees the possibility of greater EPS upside beyond FY07. The risk in achieving any upside lies in the length of the shipment suspension of Medtronic's external defibrillators in the U.S. Thus, we expect limited multiple expansion over the near-term. At its current price of $25.63 per share, ZOLL is trading at roughly 25x our FY08 earnings estimate of $1.02 per share, which is roughly in-line to the peer group multiple. We believe the stock will trade around 28x FY08 EPS estimate or a 1.1x FY08 P/E/G. Our price target remains at $29 which is based around 28x FY08 EPS estimate.

See the latest posts to the Analyst Blog by visiting http://at.zacks.com/?id=2645

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