Ipsen, a good European mid-cap to watch, says US analyst

Most American investors are familiar with large European drugmakers like Sanofi (Euronext: SAN) and Novartis (NOVN: VX) but the mid-caps like France’s Ipsen (Euronext: IPN) don't get as much attention, writes Stephen Simpson, Kratisto Investing on the Seeking Alpha blog. That's unfortunate, he adds, as Ipsen is one of several high-quality smaller European pharmaceutical companies.

Ipsen shares don't look significantly underpriced today, but there could some developments that drive them higher. Phase III data on tasquinimod, a small molecule inhibitor that binds to the S100A9 protein, could make this drug a viable alternative in the crowded prostate cancer space, and Ipsen may be on the prowl for licensing or acquisition opportunities to take advantage of a new US oncology sales infrastructure.

Ipsen also generates significant revenue from Somatuline (lanreotide) for acromegaly, where it holds about a 50% share in the US despite competition from Novartis's Sandostatin.

One of the biggest near-term drivers for Ipsen should be the expansion of Somatuline into neuroendocrine tumors. The Phase III CLARINET study (The Pharma Letter September 30, 2013) showed a 53% lower risk of progression in the Somatuline group and a distinct advantage in progression-free survival. With that, another $500 million to $800 million in incremental sales in the USA and EU comes into play, said Mr Simpson. Interestingly, Ipsen has chosen to maximize its long-term economics from this indication by choosing to build its own US oncology sales infrastructure instead of partnering the drug.