H.C. Wainwright Starts Recro Pharma (REPH) at Buy

H.C. Wainwright initiates coverage on Recro Pharma (NASDAQ: REPH) with a Buy rating and a price target of $19.00. Analyst Ching-Yi Lin said implied valuation shows an undervalued stock.

"Recently, Recro completed acquisition of worldwide rights of IV/IM meloxicam, cGMP manufacturing facility, and a royalty and formulation business from Alkermes (ALKS; not rated). In a back of the envelope calculation after the transaction, we were able to demonstrate the degree in which the company’s late stage therapeutics are currently underpriced. Specifically, we took the company's total enterprise value (EV) of approximately $145 million, subtracted the facility EV of $63 million (applied 5x to estimated EBITDA 2006 of $12.5 million) and the company’s net debt of $19 million and obtained an implied valuation of $63 million for IV/IM meloxicam and Dex-IN—a range we believe is underpriced for two late-stage pain therapeutics in development," said Lin.

"We derived our 12-month target price of $19 using a sum-of-the parts analysis to incorporate the different risk profile of the two businesses. We created a procedural-based revenue model to project our outlook and used a discounted cash flow analysis to derive a value of $13 for two late-stage therapeutics. In total, we projected revenue of $39 million commencing in 2018 and reaching peak sales of $282 million in 2023. Separately, we valued the manufacturing facility by applying a 5x multiple to an estimated 2016 EBITDA of $12.5 million," added the analyst.

For an analyst ratings summary and ratings history on Recro Pharma click here. For more ratings news on Recro Pharma click here.

Shares of Recro Pharma closed at $12.90 yesterday.

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