RBC: Neos Therapeutics Has 70% Upside, $500 Million Opportunity

RBC Capital Markets analyst Randall Stanicky initiated Neos Therapeutics Inc NEOS at an Outperform with a $35 price target – 70 percent above Friday's $20.63 closing price.

Stanicky pointed to "bullish feedback from our physician survey" that suggests that the three late-stage treatments for ADHD could drive $500 million in peak sales. Neos' ADHD treatments are either orally disintegrating tablets (ODT) or liquid suspension treatments, which should serve ADHD's large pediatric/adolescent population well, RBC said. In fact, in RBC's physician survey, nearly half of physicians said that an ODT would be their "No. 1 treatment preference if available."

The first treatment could be approved as early as November 9, the note said. This gives the stock a near-term catalyst that could propel it higher. At the same time, FDA approval – if it happened – would further validate Neos' ODT and liquid suspension technologies. Beyond ADHD, RBC said that Neos should have the opportunity to apply those technologies more broadly with a potential new pipeline announced by year-end.

On the downside, RBC said that a bearish scenario could see the price could slip to $8. Risks to the $35 price target are regulatory risks given the company's late-stage products, increased generic competition, and litigation risks.

Since its IPO in mid-July, Neos has gained 5.6 percent. The company hit a high of $23.99 and a low of $17.10 during this time.