Sometimes, whether it’s the sins of many or the sins of none, Wall Street will take a whole sector out to the woodshed for a beating. After a few years of rallying huge, the specialty pharmaceutical sector is down a stunning 30% since the end of July. With drug pricing and sales channels an issue, and politicians howling for action, the perfect negative storm has hit.
In a new research report, RBC sees the third-quarter earnings reports for the top companies in the sector as the first real chance for executives to directly address the big concerns on pricing, other specialty pharma issues and of course the big price pullback since the summer. RBC thinks that none of the above should impact outlooks, and fundamentals remain very positive. The firm also thinks that companies have the chance to initiate new and larger stock buyback programs, especially at such low levels price wise.
We screened the RBC specialty pharmaceutical universe and found six companies rated Outperform with over 100% upside to the firm’s price target.
AcelRx Pharmaceuticals Inc. (NASDAQ: ACRX) is a micro-cap company that aggressive accounts may want to consider. This specialty pharmaceutical company is focused on the development and commercialization of innovative therapies for the treatment of acute pain. The company’s late-stage pipeline includes ARX-04 (sufentanil sublingual tablet, 30 mcg) for the treatment of moderate-to-severe acute pain in a medically supervised setting and Zalviso (sufentanil sublingual tablet system) for the management of moderate-to-severe acute pain in adult patients in the hospital setting.
The RBC price target for the stock is $7, the same as the Thomson/First Call consensus target. The shares closed most recently at $3.47.
Akorn Inc. (NASDAQ: AKRX) a niche pharmaceutical company engaged in the development, manufacture and marketing of multisource and branded pharmaceuticals. In 2013 the company purchased Hi-Tech Pharmaceutical for $640 million in cash. The combination of Akorn and Hi-Tech transformed the company into a larger, more diversified generic player. It also brought critical mass and scale to Akorn’s business and has strengthened the company’s position with retail and institutional customers.
RBC has long seen this company as a potential takeover candidate. Its price target is a massive $65 and the consensus target is $53.57. The stock closed on Wednesday at $26.03.
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