Canaccord On Actavis: 'Consensus Isn't Always Wrong'

In a report published Tuesday, Canaccord Genuity analysts maintained a Buy rating on Actavis plc ACT, with a price target of US$352, after the company reported robust 1Q results.

Actavis reported its 1Q revenue at $4.2B, ahead of the Canaccord Genuity estimate of $3.8B and the consensus estimate of $4.0B. Non-GAAP EPS came in at $4.30, ahead of the Canaccord Genuity estimate by $0.83 and the Street by $0.36.

Actavis' 2015 guidance included Allergan for the first time. The company guided to EPS of $17.00-$18.50. The analysts believe that even this is "beatable," given that 8 of the top 10 drugs are exhibiting double-digit growth.

In the report Canaccord Genuity noted, "As of May 1st, ~47% of patients have converted to Namenda XR, slowly moving toward the Q2 target conversion rate of 60%. Actavis expects to exceed this figure with the launch of Namzaric (fixed-dose combo of Namenda XR and Aricept) in mid-May…Since 5mg Aricept is ~22% of volume, we think there is ample room for growth."

"Given the double-digit growth expected from the legacy Allergan business and current buying constraints, we don't see obvious M&A targets Actavis should pursue in the short term," the analysts added.

The report further mentioned:

• Actavis once again affirmed that it doesn't expect an AdCom for Eluxadoline - something we find extremely surprising.
• Cariprazine has a PDUFA in June and we continue to see it as a $500M peak potential product.
• In early April, Actavis and Rhythm Health initiated a Ph2b trial assessing relamorelin for treating gastroparesis in patients with type 1 and type 2 diabetes, with data expected in mid-2016. This is, by far, our favorite pipeline project - even above some of the others that the Street is more focused on.