Catalent (NYSE:CTLT), Inc. CTLT has been gaining on the back of its slew of strategic deals over the past few months. A robust third-quarter fiscal 2021 performance, along with integrated development and product supply chain solutions, is expected to contribute further. However, stiff competition and regulatory requirements persist.
Over the past year, this Zacks Rank #1 (Strong Buy) stock has gained 32.4% compared with 33.9% rise of the S&P 500 composite. The industry fell 14.7% in the said time frame.
The renowned global provider of advanced delivery technologies has a market capitalization of $20.54 billion. The company projects 20.9% growth for the next five years and expects to maintain its strong performance. It has delivered an earnings surprise of 10.17% for the past four quarters, on average.
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Let’s delve deeper.
Strategic Deals: We are optimistic about Catalent’s robust growth opportunities via its recent tie-ups and buyouts. The company, this month, signed a commercial supply agreement with Edenbridge Pharmaceuticals, LLC for a novel formulation of glycopyrrolate using Catalent’s proprietary Zydis orally disintegrating tablet (“ODT”) delivery technology, intended for use as adjunctive therapy in the treatment of patients with peptic ulcer.
Also in August, Catalent announced a strategic manufacturing collaboration with clinical-stage pharmaceutical company DisperSol Technologies to accelerate the development of multiple DisperSol pharmaceutical products. In July, Catalent inked a development agreement with JOS Pharmaceuticals, according to which the former will commence a viability study for the potential development of a licensed cannabidiol product to be used as an anesthetic premedication. Per the agreement terms, the study will be using Catalent’s proprietary Zydis ODT technology.
Integrated Development and Product Supply Chain Solutions: We are upbeat about Catalent’s ability to bring together its development solutions and advanced delivery technologies to offer innovative development and product supply solutions. Management believes that Catalent’s development and product supply solutions, such as the OptiForm Solutions Suite and OneBioSuite, will continue to contribute to its future growth.
Catalent, in April, announced that it has made an investment to expand capabilities at its clinical supply services facility in Philadelphia to support sponsors developing cell and gene therapies.
Strong Q3 Results: Catalent’s solid third-quarter fiscal 2021 results, along with year-over-year uptick in both the top and bottom lines, buoy optimism. Continued strength in global demand for COVID-19 vaccines and treatments drove the Biologics arm in the quarter under review, which is encouraging. Robust performance by the Clinical Supply Services segment raises our optimism. Expansion of both margins bodes well. A solid revenue guidance is also encouraging.
Downsides
Regulatory Requirements: The healthcare industry is highly regulated. Catalent and its customers are subject to various local, state, federal, national and transnational laws and regulations. Any change to such laws and regulations could adversely affect the company. Failure by Catalent or its customers to comply with the requirements of these regulatory authorities could result in warning letters, product recalls or seizures, and other adverse business impacts.
Stiff Competition: Catalent operates in a highly competitive market where it competes with multiple companies, including those offering advanced delivery technologies and outsourced dose form or biologics manufacturing. The company also competes in some cases with the internal operations of those pharmaceutical, biotechnology and consumer health customers that also have manufacturing capabilities and choose to source these services internally.
Estimate Trend
Catalent is witnessing a positive estimate revision trend for 2021. In the past 90 days, the Zacks Consensus Estimate for its earnings has moved 1.4% north to $2.94.
The Zacks Consensus Estimate for the company’s fourth-quarter fiscal 2021 revenues is pegged at $1.13 billion, suggesting a 18.9% improvement from the year-ago quarter’s reported number.
Other Key Picks
A few other top-ranked stocks from the broader medical space are Henry Schein (NASDAQ:HSIC), Inc. HSIC, IDEXX Laboratories, Inc. IDXX and Intuitive Surgical (NASDAQ:ISRG), Inc. ISRG.
Henry Schein’s long-term earnings growth rate is estimated at 13.9%. The company presently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
IDEXX’s long-term earnings growth rate is estimated at 19.9%. It currently has a Zacks Rank #2.
Intuitive Surgical’s long-term earnings growth rate is estimated at 9.7%. It currently carries a Zacks Rank #2.
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