Zacks Analyst Blog Highlights: Alnylam Pharmaceuticals, GlaxoSmithKline, American Axle, GM and Health Net

Business Wire,  June 2, 2008  

Tags: blog, General Motors Corp., GlaxoSmithKline Plc., New York Stock Exchange, stock

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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: Alnylam Pharmaceuticals (Nasdaq: ALNY), GlaxoSmithKline (NYSE: GSK), American Axle (NYSE: AXL), GM (NYSE: GM) and Health Net, Inc. (NYSE: HNT).

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Here are highlights from Friday's Analyst Blog:

Mergers for Alnylam Create Risk

Alnylam Pharmaceuticals (Nasdaq: ALNY) is a biopharmaceutical company developing novel therapeutics based on RNA interference, or RNAi technology. After signing a multi-million dollar deal with Roche in 2007, the company has continued the deal-signing spree with a development and commercialization deal with GlaxoSmithKline (NYSE: GSK) (for Regulus Therapeutics, Alnylam's joint venture with Isis Pharmaceuticals) in April 2008 and another with Takeda in May 2008.

Both deals offer revenue potentials in excess of $500 million. ALN-RSV01 advanced into a second phase II trial following positive results from the first phase II trial in February 2008. We maintain our Hold rating on Alnylam shares with a price target of $32.

American Axle T-Boned by SUVs

American Axle's (NYSE: AXL) focus on diversification and geographical expansion is helping the company to grow. The company's recent backlog of new and incremental business, to be launched through 2009 to 2013, is $1.4 billion in future annual sales.

Weak SUV demand is greatly affecting AXL's sales. Furthermore, high commodity costs and pricing pressure from OEMs remain causes for concern. The company recently reached a resolution with the United Auto Workers (UAW) to end the 11-week-long strike at its five plants. Thus, we rate the stock a Hold.

Currently, AXL's stock is trading at approximately 8.4x our 2009 EPS estimate of $2.25. AXL's focus on improving its product mix, diversification of its client base, and outsourcing to low-cost countries are some of the positives associated with the stock. However, due to production cuts by GM (NYSE: GM), pricing pressure from OEMs, and high commodity prices, we rate the stock a Hold. Using our fiscal year 2009 earnings estimate and a forward multiple of 8.7x, we value the stock at $19.50.

Health Net Downgraded to a Hold

We downgrade Health Net, Inc. (NYSE: HNT) to Hold from Buy, and remain concerned with the rate of customer attrition in the insurer's commercial health plan segment. Significant declines in commercial members over time will challenge operational efficiencies and increase the company's reliance on government-sponsored programs increasing reimbursement risk.

Health Net's two primary markets, California and the Northeast, are highly competitive. Both markets have a high number of large managed care plan providers and groups of powerful hospitals. Price competition is more prevalent in these markets due to the high number of providers, and both markets have suffered in the recent economic downturn with higher levels of unemployment. Health Net is not well positioned to compete in either region.

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