Recro CRL disappointing, but don’t ignore CDMO business, says Piper Jaffray

Piper Jaffray analyst David Amsellem lowered his price target for Recro Pharma to $9 from $12 after the company received a second Complete Response Letter from the FDA for its intravenous form of meloxicam for post-operative pain. What is clear from the CRL is that the agency has moved the goal posts on Recro, Amsellem tells investors in a research note. Two successful placebo-controlled studies along with a large safety data base, historically the standard by which agents for acute pain are evaluated, “does not pass muster in this case,” says the analyst. As such, he would not be surprised to see Recro initiate a dispute resolution process. Though the latest CRL is “undoubtedly disappointing,” the company’s cash flows from its contract development and manufacturing organization segment are not fully appreciated at current share levels, argues Amsellem. He believes this should “provide a floor in the high-single digits per share at a minimum.” The analyst reiterates an Overweight rating on Recro Pharma.
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