Can Aegerion Still Rise 70%?

Aegerion Pharmaceuticals Inc. (NASDAQ: AEGR) should have a slogan that says “We love volatility.” The biotech stock now trades for just under $60 after its earnings report, but the 52-week trading range is $29.61 to $101.00. After a poor earnings reaction, we cannot help but wonder if Aegerion can rise by 70% as some are suggesting.

The impetus for this review is not just the earnings report. Bank of America Merrill Lynch issued a note on Aegerion that both maintained a Buy rating and maintained its $102 price target.

This $102 target implies about 70% upside. It is not the norm for a bulge bracket firm like Merrill Lynch to be out touting 70% upside in their Buy ratings. But then we looked around and saw that the Thomson Reuters consensus price target was roughly $101. The street high target is up at $115.

Given that this stock now being just under $60, we would remind readers that widespread optimism like this rarely holds when you see a negative news reaction. Analysts just cannot tell their bosses that they are sticking by that much upside. That being said, perhaps the target prices may start to drift lower.

So, what is it that Merrill Lynch sees? The firm said:

Following Aegerion’s fourth quarter results, we have not changed our $102 price objective and maintain our Buy rating on Aegerion. The company is exploring additional uses for Juxtapid in a pediatric indication and in Japan, which could lead to upside to our estimates. The expansion in sales and customer service capacity could help add new patients and keep compliance rates high. … We view today’s pullback as a particularly attractive buying opportunity as our January doctor survey indicated a large market for Juxtapid.

Juxtapid is the company’s first approved drug, and it targets homozygous familial hypercholesterolemia. This just launched in January of 2013, and Merrill Lynch expects that this company will begin to move to profitability in the third quarter of this year.

Aegerion shares were down 3.5% at $59.50 in Thursday morning trading.