Catalent, Inc. CTLT’s plans for expansion of its biologics segment are likely to bring the stock back after weak second-quarter comps and reaccelerate growth through 2019, according to Raymond James.
The Analyst
Michael Baker of Raymond James upgraded Catalent from Market Perform to Outperform and assigned the stock a $48 price target.
The Thesis
Catalent is an American biotech company and leading drug development, delivery and supply partner.
While Catalent reported disappointing comp figures in Q2, this negative catalyst has been largely priced into the stock, Baker said in a Wednesday note.
Catalent’s acquisitions of Cook and Accucaps, along with the “aggressive” expansion of its Madison, Wisconsin biologics facility, have strengthened the company’s competitive standing in the biologics space and increased its revenue exposure, the analyst said.
“We are confident that CTLT will enter fiscal 2019 with rising momentum and an attractive setup that includes strong biologics top-line growth and continued delevering and diversification of the business.”
The biologics segment is a strategic concentration of Catalent's focus on specialty medicines for targeted patient populations, Baker said.
“This is achieved by focusing investment on smaller batch size capability, typically under 5,000 liters, which also allows for the increased flexibility that is a priority for these type of clients, who typically lack the desire to build internal infrastructure”
Price Action
At the time of publication, Catalent shares were trading up 2.7 percent at $41.61.
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