UPDATE: Piper Jaffray Upgrades Forest Laboratories, Previous Thesis is No Longer Tenable

In a report published Tuesday, Piper Jaffray analyst David Amsellem upgraded the rating on Forest Laboratories (NYSE: FRX) from Underweight to Neutral, and raised the price target from $33.00 to $49.00.

In the report, Piper Jaffray noted, “We are upgrading Forest to a Neutral from an Underweight and raising our price target to $49 from $33. Given the backdrop of a dynamic M&A landscape in specialty pharma (with FRX possibly using its balance sheet more aggressively) coupled with the potential for meaningful expense savings, we believe that our previous bearish thesis is no longer tenable. Trough EPS, when factoring in the erosion of the Namenda franchise (though mitigated by Namenda XR contribution) and moderate cost cuts, will likely be near $3.00 per share by FY17. The implied P/E in our view is reasonable given where the broader peer group is trading (particularly in the context of a net cash position of over $3B). Our new PT is based on a P/E of 20x our new FY17 EPS estimate of $2.90, discounted 1.5 years at 12%.”

Forest Laboratories closed on Monday at $51.19.