Depomed Inc (NASDAQ:DEPO) Rallies 15% on Analysts’ Upgrades

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Depomed Inc (NASDAQ:DEPO) shares closed 15.09% higher to $17.85 on Monday, following reports of a stock outlook upgrade by Mizuho Securities.

Depomed Inc (NASDAQ:DEPO) is a specialty pharmaceutical company focused on pain and other central nervous system (CNS) conditions. Its products include NUCYNTA ER or tapentadol extended release tablets, which are used for the management of pain severe enough to require daily, around-the-clock, long term opioid treatment, NUCYNTA, Gralise, CAMBIA, Zipsor, and  Lazanda nasal spray.

Mizuho Securities upgraded Depomed Inc (NASDAQ:DEPO) from Neutral to Buy with a price target of $19.00 from the earlier $18.00 target on increased takeout profitability. This follows the company’s upbeat earnings release, which actually showed weaker than expected results and dragged the stock price to bargain levels. “We think there is now an attractive entry point into a stock with some positive momentum and takeout prospects ahead, and we upgrade DEPO to Buy from Neutral. Our PT goes to $19 from $18,” noted analyst Irina Koffler.

Koffler also mentioned that their analysis firm previously assigned a 20% probability of takeout to Depomed at 80% reliance but they are now shifting to a 50% probability allocation leading up to the NUCYNTA ER settlement. This is set to take place around the third quarter, possibly coinciding with replacements of board members due to active shareholder demand. There’s also talk of potential acquisition, as analysts have been buzzing about how Depomed Inc (NASDAQ:DEPO) can unlock significant value through a strategic buyer.

In its earnings report released May 5, the company reported revenue of $105 million, up 225% compared to the first quarter of last year and above the midpoint of their Q1 revenue guidance. This growth was primarily driven by the strong performance of their flagship NUCYNTA franchise. Non-GAAP earnings per share came in at $0.12 at a profit of $8 million, short of analysts’ estimates at $0.19.

 

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