Hi-Tech Pharmacal weakness on Wockhardt approval overdone, says Canaccord
Canaccord views the sell-off in Hi-Tech Pharmacal shares after Wockhardt received approval to sell generic Flonase as an over-reaction. The firm recommends buying the stock at these levels, but admits it did not anticipate a competitor approval this quickly. :theflyonthewall.com
Hi Tech Pharmacal Co. Inc. (NASDAQ: HITK) has been battered and bruised during the last few trading sessions. Shares from almost $42 to almost $33 before recovering back to just over $35 on the share price. Now we have Canaccord Genuity not only reiterating a “Buy” rating but maintaining a $45.000 price target objective.
The report noted that shares have slid about 16% on news of an approval of a competitor to Hi-Tech’s fluticasone. As noted, “While our forecasts reflected competition and there had long been speculation of a competitor coming, we didn’t expect it this quickly and the timing is clearly frustrating on several levels in clipping what could have been continued EPS upside. From here, investor trepidation near term a From here, investor trepidation near-term around the stock is understandable and expected pending better visibility on impact, but our early checks indicate it as manageable and likely less severe than many expect.
As noted, Fluticasone competition is now here and already reflected in the model. Another issue is that this pullback was expected but not to this extent because of a modest market share aim of 10% to 15% and pricing issues.
Personally, it does make Canaccord look a little bad. I thought that their coverage of last week gave me a little comfort, but they may not have done their homework. Let's see what effect this has - we should know over the next few quarters.