GILD - Model N stock rises as Morgan Stanley starts coverage with overweight rating

2023-03-27 08:09:57 ET

Model N ( NYSE: MODN ) shares rose 2% in premarket trading on Monday as investment firm Morgan Stanley started coverage on the company, citing its "best in class" profitability.

Analyst Craig Hettenbach, who put an overweight rating and per-share price target of $43 on Model N ( MODN ), noted the company has significant exposure to the life sciences (roughly 85% of total sales from the sector) and high tech (the remaining 15%) industries, providing it with an "attractive combination of near-term defensive characteristics and long-term secular growth drivers.

Additionally, Hettenbach also noted Model N's ( MODN ) EBIT and free cash flow margins are in the first group of its competitors, which plays well with the "profitable growth" theme.

The analyst added that Model N ( MODN ) is helping pharmaceutical manufacturers go up against "price erosion," letting its partners analyze relationships and revenue management via its software.

The company partners with the top 20 pharmaceutical companies, including Pfizer ( PFE ), Gilead ( GILD ), among others.

"By utilizing Model N's products, customers are able to capture 3-5% of revenue leakage, equating to up to $25M in savings for brands with $500M in annual sales," Hettenbach wrote in an investor note.

Earlier this month, Model N ( MODN ) priced $220M in a convertible senior notes offering .

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