Roth Capital Partners has launched coverage of Recro Pharma (NASDAQ:REPH) with a “buy” rating and a $24 price target. The stock closed at $9.31 on Thursday.
“The impetus for our buy rating on Recro shares is the upside potential of the pain management pipeline combined with the downside protection from the manufacturing business,” writes analyst Scott Henry.
The next key catalyst is readout of the company’s second Phase 3 trial for IV meloxicam at the end of 2016, he added.
He cited a number of drivers to his investment thesis, noting that a shift in pain management appears away from opioids when possible and Recro’s pipeline could potentially help fill this niche. “IV Meloxicam has significant revenue potential, he added.
“We target a positive Phase 3 readout in the fourth quarter of 2016 for IV meloxicam,” he predicted. “Our confidence comes from highly significant efficacy in prior Phase 3 trials and Phase 2 work.”
Mr. Henry also values Recro’s cash flow producing manufacturing business at about $9 a share based on a multiple of eight times estimated EBITDA. “In our opinion, this unit offers downside protection for shareholders as well as cash flow to support the pipeline,” he added.
