CRT Capital Upgrades Akorn Inc To Buy

CRT Capital upgraded Akorn, Inc AKRX Thursday from Fair Value to Buy with a $46 price target.

Analyst Tim Chiang believed “the recent sell off in AKRX shares post 3Q results creates a potential buying opportunity, based on our view that the Company will benefit from solid pricing trends in products like topical Clobetasol propionate (a commonly prescribed corticosteroid for the treatment of various skin conditions like eczema).”

Chiang estimated 2014 – 2016 “Clobetasol sales of $39M, $85M, and $102M, respectively. Our analysis of this suggest that recent price hikes by a competitor, Taro, could lead to higher sales and profits for all of the major players in this market, with Akorn currently the No.2 player by market share. We forecast Clobetasol’s gross margins above 90 percent throughout the F’14 – F’20 period.”

“Clobetasol represents a large market, counting over 6 million retail prescriptions in the US in 2013. The majority of those, about 84 percent of the prescription count (and likely 50 percent of the total amount spent) are for the cream, ointment and topical solution presentations,” according to the analyst report.

Chiang concluded that “AKRX shares trade at ~22x our 15 EPS forecast of $1.68, a ~30 percent premium to its peer group. While AKRX shares do trade at a premium, we believe Akorn has a 14-18 CAGR of ~30 percent, which is higher than its peers.”

Akorn, Inc recently traded at $38.33, up 1.73 percent.