2023-04-10 15:36:01 ET
Deutsche Bank raised its recommendation for contract manufacturer Catalent ( NYSE: CTLT ) to Buy from Hold and lifted its price target to $88 from $79 per share, citing a potential upside to the company's 2023/ 2024 estimates.
"The crux of our upgrade is that we have increased conviction and see potential upside to our 2023 / 2024 estimates," the analyst Justin Bowers wrote.
Bowers points to CTLT's strategic partnerships with COVID-19 vaccine maker Moderna ( MRNA ) and gene therapy developer Sarepta ( SRPT ) to argue that the company has "diminishing tail risk."
Citing CTLT's partnership for Duchenne muscular dystrophy, SRP-9001, with Sarepta ( SRPT ), Bowers argues that the latter, having accounted for $135M in CY22, could lead to a three-fold rise in its contribution in FY24.
Despite YTD outperformance, "we still see a 2.5-to-1 positive risk / reward skew for the stock under a FDA approval for SRP-9001 and potentially higher in an M&A scenario," he added.
The analyst also argues that the recent contract extension by Moderna ( MRNA ) for its pandemic-era collaboration further de-risks Catalent's ( CTLT ) forward revenue and issues a $100 per share takeout value for the stock, noting its M&A prospects.
In early February, Catalent ( CTLT ) shares surged amid news reports that the life sciences company Danaher ( DHR ) was looking for a deal to buy it at "a significant premium."
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Catalent upgraded at Deutsche Bank on potential upside to forecasts