Mizuho Upgrades Eagle Pharmaceuticals (EGRX) to Buy Following Unexpected J-code Win; Sees 60% Chance of a Takeout
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Mizuho Securities upgraded Eagle Pharmaceuticals (NASDAQ: EGRX) from Neutral to Buy with a price target of $78.00 (from $62.00) following an unexpected decision from CMS that should preserve and increase its Bendeka royalty out to at least 2026 (and potentially to 2033).
Analyst Irina Koffler commented, "The CMS reversal on the unique Bendeka J-code was unexpected, and forced us to re-evaluate our assumptions on this product. CMS granted Bendeka a unique J-code, overturning its negative decision earlier in the year. The implication is that hospitals using Bendeka after the entry of Treanda powder generics in 2019 can continue to be reimbursed for Bendeka at branded pricing. We were surprised by this outcome given our previous work indicating that only 2/18 drugs with a preliminary negative decision were overturned in the 2011-2015 period. As a result, we are upgrading the stock to Buy from Neutral, and raising PT to $78 from $62. Our PT is now a weighted blend of DCF ($51) and SOTP takeout valuation ($96). We assume a higher 60% probability of takeout to arrive at our blended $78 PT."
Shares of Eagle Pharmaceuticals closed at $68.10 yesterday.
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Related EntitiesIrina Koffler
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