Roth ups Recro Pharma PT to $10 from $7.50

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Roth Capital Partners raised its price target for Recro Pharma (NASDAQ:REPH) to $10 from $7.50 but maintained a “neutral” rating, pending greater understanding of the company’s contract development and manufacturing operations (CDMO). The stock closed at $6.52 on April 3.

Recro is reducing operating expenses in its Acute Care segment, including a reduction in staff of about 50 employees. “The company appears to be maintaining a skeletal staff to pursue resolution of the NDA for IV meloxicam, but has acknowledged that it intends to seek a strategic partner for commercialization,” writes analyst Scott Henry.

“We view this as the prudent course,” Mr. Henry said, adding that this effectively turns the company into a CDMO, with potential upside on IV meloxicam, but no significant further investment.

Meloxicam is a long-acting NSAID with preferential COX-2 inhibition that possesses anti-inflammatory, analgesic, and antipyretic activities.

The company also increased its 2019 EBITDA guidance for the CDMO to $38-million to $40-million, from $34-million, based on current trends and expectations for new business, with the outlook for revenue raised to $85-million to $87-million, from $80-million. “We assume that this segment can be an approximate 10% top-line growth business going forward,” Mr. Henry said.

In addition, the company guided that it expects to reach cash flow breakeven in the third quarter of 2019 and be cash flow positive in the second half of this year, he added.

Stephen Kilmer