Morgan Stanley Initiates Amneal Pharmaceuticals, Anticipates Outperformance

Amneal Pharmaceuticals AMRX announced Monday the FDA approval of its newest drug, a generic version of Potassium Chloride oral solution.

The Analysts

Morgan Stanley analyst David Risinger initiated coverage with an Overweight rating for Amneal Pharmaceuticals, with a price target of $22.

The Thesis

Due to a strong execution of a new product and the history of this management team, Risinger expects a clear outperformance. He considers leadership a key catalyst for this endeavor.

“Executive Chairman Paul Bisaro and CEO Rob Stewart previously helped drive significant outperformance at Watson Pharma. Although historical performance is no guarantee of future results, we believe management has the right experience, track record,and team culture to deliver outperformance at Amneal,” Risinger said in a note.

With the anticipation of growth above competitors, Risinger notes the importance of quarterly performance, pipeline newsflow and external transactions.

Despite the question of performance in a challenging pricing environment, analysts remain optimistic for three reasons.

"(1) We expect US generics pricing pressure to moderate somewhat over the next year. (2) Amneal's diversified product portfolio helps support revenue prospects and durability. (3) The company's focus on limited competition/complex/high margin products and expectation of >$200M synergies should yield financial upside,” Risinger said.

Price Action

Amneal Pharmaceuticals shares were trading up 5 percent at $19.44 Monday morning.

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