Analyst Maintains Buy Rating on Depomed Inc (DEPO), Following Nucynta Performance Satisfactory

By Carrie Williams

HealthcareIn a research report released to investors yesterday, analyst Scott Henry from Roth Capital reiterated his Buy rating on the specialty pharmaceutical company Depomed Inc (NASDAQ: DEPO), with a price target of $27. This PT is an upside of 36.57% from yesterday’s close at $19.77.

DEPO has reported tepid Q3 results on November 7, after market close. For Q3, the drug maker company missed on both EPS ($0.28, narrower by $0.07) as well as revenue ($111 million, lower by $16.22 million). The disappointing Q3 results were mainly attributed to the poor performance of company’s leading brand of painkillers Nucynta as well as Gralise. This was mainly attributed to factors like lower reimbursement, higher use of e-vouchers and co-pay coupons, as well as a reduction in shipments to wholesalers.

There are two types of Nucynta painkillers depending on the severity of pain to be treated, Nucynta IR and Nucynta ER. Nucynta IR is a shorter-acting treatment (4-6 hours) for the management of moderate to severe acute pain in adults and Nucynta ER is intended for the management of more severe pain.

Henry noted that even though the overall macro environment for the opioid market remained depressed, Nucynta franchise reported ~15% YoY growth and considered the product as the primary fundamental focus for DEPO investors. Henry also viewed the weekly data of Nucynta to be in line with the expectations. For the week, Nucynta IR had an annualized run rate of $151.0 million at a price point of $300 per prescription while Nucynta ER reported an annualized run rate of $162.8 million at a price point of $450/ script.

Last month, the court had ruled in favor of DEPO in a patent litigation over Nucynta and had extended its market exclusivity until 2025. The company had bought the U.S. rights to Nucynta from Janssen Pharmaceuticals Inc. (Johnson & Johnson unit) for $1.05 billion in 2015. Even though there were rumors floating around about a $2.6 billion takeover bid from Mallinckrodt last month, no further news or confirmation has been provided since then.

For now, according to TipRanks.com, Depomed has an analyst consensus of a Moderate Buy, with a price target consensus of $25.43.