Leerink Keeps Depomed (DEPO) at 'Outperform'; Disappointing Q3 Steps-up Pressure to Sell

November 8, 2016 11:00 AM EST
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Price: $18.48 +0.11%

Rating Summary:
    10 Buy, 4 Hold, 1 Sell

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Today's Overall Ratings:
    Up: 13 | Down: 22 | New: 54
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Leerink affirms its Outperform rating and $22 price target on Depomed (Nasdaq: DEPO) following Q3 results and update on Monday night.

Analyst Jason M. Gerberry commented today, DEPO reported disappointing 3Q results, missing our/Street’s revenue forecasts by 13% and reducing 2016 revenue guidance for the third consecutive qtr. The miss reflects challenges DEPO faces as a stand-alone, will likely heighten pressure to sell the company albeit at a lower valuation reflecting deteriorating commercial prospects for DEPO’s portfolio products.

About half the 3Q miss was attributable to inventory stocking fluctuations and payer contractual price protections that limited flow-through of August price increases while the remainder was attributed to more durable issues like (1) payer rebate “catch-up” – the gross-to-net deductions are expected to increase going forward; (2) lower than expected script demand for lead products, Nucynta and Gralise. As a result, we’re lowering our revenue forecasts by 6% for 2016 and by 8-18% for 2017-21, and our revised ests are now 8-12% below yesterday’s consensus. Our updated DEPO stand-alone price target is $15/shr, based on our DCF, and our takeout valuation for DEPO is $22-23. Our OP rating is based solely on takeout prospects -- limited commercial-stage, accretive targets with good patent runway, the analyst noted.

For an analyst ratings summary and ratings history on DepoMed Inc click here. For more ratings news on DepoMed Inc click here.

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