2023-04-04 11:57:51 ET
Barclays downgraded the contract manufacturer Catalent ( NYSE: CTLT ), citing a balanced upside/downside setup based on what the firm pointed to as seemingly "aggressive" implied Q4 FY23 estimates and a lack of clarity in the FY24 outlook.
While arguing that CTLT's buyout prospects can support its shares, analyst Luke Sergott points out that a bid following a potential Q4 miss could hurt the upside in a future acquisition deal.
In early February, Catalent ( CTLT ) shares surged amid news reports that life sciences company Danaher ( DHR ) was interested in acquiring it, indicating "a significant premium."
"We continue to favor the business long term, but move to the sidelines given the limited visibility through '24," Sergott wrote as the firm downgraded Catalent ( CTLT ) to Equal Weight from Overweight and slashed its price target to $70 from $82 per share.
Sergott cites CTLT's management as noting that the company's forecasts reflect work on Sarepta Therapeutics' ( SRPT ) Duchenne muscular dystrophy therapy ahead of a potential accelerated approval by May 29 action date.
However, "with the rest of the business struggling to improve, we cannot say with confidence that mgmt will hit their FY guide," the analyst added, noting uncertainty over the drug's approval after the FDA recently decided to subject the company's marketing application to an AdCom meeting.
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Catalent downgraded at Barclays citing unclear outlook