On Friday, Collegium Pharmaceutical Inc. (NASDAQ:COLL) received an upgrade from Jefferies from Hold to Buy, with a new price target set at $44.00, an increase from the previous target of $41.00. The firm's decision is influenced by several factors that suggest a favorable outlook for the company's financial performance.
The upgrade comes as Collegium Pharmaceutical is perceived to be undervalued, trading at approximately four times its EBITDA following the departure of its CEO. Jefferies sees this as an opportunity, with the risk/reward balance tilting positively. The firm's analyst cited strong second-quarter trends and the market consensus on EBITDA as being too low as reasons for the more optimistic stance.
Additionally, the potential benefits from the loss of exclusivity (LOEs) events are believed to be underestimated. Jefferies anticipates that these events could provide significant upside for the company. Furthermore, the firm projects that Collegium Pharmaceutical's cash generation will be substantial up to the year 2028, to the point where its net cash is expected to surpass the market capitalization in fiscal year 2028.
The new price target of $44 is based on a balanced approach, combining a multiple of five times the company's projected 2025 adjusted EBITDA and a discounted cash flow (DCF) analysis. This revised target reflects Jefferies' confidence in the company's growth prospects and financial health over the coming years.
In other recent news, Collegium Pharmaceutical initiated a $35 million accelerated share repurchase as part of a larger $150 million share repurchase program, with Jefferies LLC handling the transaction. This move comes after strong financial performance and growth in prescription numbers for its products Belbuca® and Xtampza® ER, as well as the Nucynta Franchise authorized generic agreement.
Additionally, the company's stock was downgraded from Overweight to Neutral by Piper Sandler, a decision based on financial projections and market conditions, not related to the recent CEO transition. Collegium's first-quarter earnings for 2024 were reported at an adjusted diluted EPS of $1.45 on revenue of $144.9 million, slightly missing consensus estimates.
In line with these developments, Collegium Pharmaceutical has reported robust growth projections for 2024, including a notable increase in revenue and prescriptions for its pain management drug BELBUCA. The company has also announced leadership changes with Mike Heffernan taking over as Interim President and CEO. Collegium has reaffirmed its financial guidance for 2024 and expects an improved outlook for 2025 and beyond, partly due to the anticipated benefits from the Medicare Part D redesign.
InvestingPro Insights
Following the upgrade from Jefferies, Collegium Pharmaceutical Inc. (NASDAQ:COLL) showcases several compelling metrics that align with the positive outlook presented. With a market capitalization of approximately $1.03 billion and a price-to-earnings (P/E) ratio of 11.15, the company appears to be positioned for potential growth, especially considering the adjusted P/E ratio for the last twelve months as of Q1 2024 is even more attractive at 10.51.
InvestingPro Tips highlight that management's aggressive share buybacks and a high shareholder yield are strategies that may be contributing to the company's financial robustness. Additionally, analysts have revised their earnings upwards for the upcoming period, which is a positive signal for future profitability. The valuation also implies a strong free cash flow yield, which supports Jefferies' anticipation of substantial cash generation.
Despite the stock's poor performance over the last month, with a 15.92% decline, its long-term trajectory is more encouraging, with a one-year price total return of 46.68%. These data points provide a broader picture of the company's financial landscape, reinforcing the upgrade decision by Jefferies.
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