What's Going On With Biotech Contract Service Firm Catalent Stock Today?

Catalent Inc CTLT shares are trading lower due to its significant exposure to Sarepta Therapeutics Inc SRPT on the back of disappointing data from a pivotal gene therapy trial.

According to William Blair, Sarepta accounted for nearly 10% of total revenue and roughly 30% of non-COVID biologics revenue in fiscal 2023 for Catalent.

Looking ahead to FY24, Catalent anticipates 30% Y/Y growth in non-COVID biologics revenue, reaching approximately $1.35 billion to $1.80 billion. This growth is primarily fueled by a 60%-plus expansion attributed to Sarepta, translating into an estimated total revenue of nearly $700 million from the collaboration during the fiscal year, representing a substantial increase from the approximately $425 million generated in FY23.

Of the $425 million in revenue attributed to Sarepta in FY23, William Blair's analysis suggests that roughly $350 million came from Elevidys, with expectations of an increase to nearly $600 million in FY24.

Regarding manufacturing for Elevidys, Sarepta has reiterated its intention to ramp up production, preparing for the most probable scenario of full approval without age-related or ambulatory restrictions, implying a relatively limited near-term impact on Catalent. However, if Elevidys' label expansion falls short of expectations, it could have significant implications for Catalent's future.

Consequently, just as Catalent is navigating beyond the challenges posed by the "COVID cliff," a new hurdle, the "Elevidys cliff," emerges on the horizon. This potential obstacle could present a substantial challenge to the company's top-line growth and significantly impact margins as it adapts to the unanticipated availability of viral vector capacity. 

Considering the persisting productivity challenges, the uncertain outlook for Sarepta's business, and the broader economic environment, William Blair maintains the Market Perform rating.

Price Action: CTLT shares are down 16.08% at $33.50 on the last check Tuesday.

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