Versant ups Patheon to buy

Versant Partners upgraded Patheon (TSX:PTI) to “buy” from “neutral” and raised the 12-month target price to $3.60 from $3.25. The stock is trading at $2.62, down one cent, on Tuesday afternoon.

Analyst Doug Loe writes that in addition to Patheon closing a $280 million (U.S.) offering of notes, there are “encouraging signs from peers that pharma outsourcing space is stabilizing and peers are trading at multiples above those currently ascribed to Patheon,” giving  “us confidence that (Patheon) shares have minimal downside from current levels.”

In arriving at his new price target, Mr. Low applied a P/E multiple of 11 times and seven times EV/EBITDA  to his fiscal 2011 forecasts, which is “still a discount to the peer group,” he added.