Catalent, Inc. CTLT has been gaining on the back of its slew of strategic deals over the past few months. A robust fourth-quarter fiscal 2021 performance, along with a few product launches, is expected to contribute further. Catalent’s operation in both a tough competitive landscape and a highly regulated market poses a threat.
Over the past year, this Zacks Rank #2 (Buy) stock has gained 41.1% compared with 32.3% rise of the S&P 500 composite. The industry fell 17.3% in the said time frame.
The renowned global provider of advanced delivery technologies has a market capitalization of $22 billion. The company projects 19.7% growth for the next five years and expects to maintain its strong performance. It has delivered an earnings surprise of 11.27% 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, in September, signed a commercial supply agreement with Phathom Pharmaceuticals for its lead compound — vonoprazan — a novel, orally active-potassium competitive acid blocker (P-CAB).
In August, Catalent announced that it has reached an agreement to acquire Bettera Holdings (a well-known manufacturer in the high-growth gummy, soft chew and lozenge segments), subject to customary conditions. Also in August, the company announced a strategic manufacturing collaboration with clinical-stage pharmaceutical company, DisperSol Technologies, to accelerate the development of multiple DisperSol pharmaceutical products.
Product Launches: Catalent has been quite active regarding product launches over the past few months. The company, in July, had announced the launch of its new OptiDose Design Solution at the Controlled Release Society annual meeting.
Also in July, the company had introduced GPEx Lightning, its next-generation cell line development technology. GPEx Lightning combines novel technologies, which include a gene-insertion technology, to further reduce the time period for drug substance development by up to three months, unlike previous timelines.
Strong Q4 Results: Catalent’s solid fourth-quarter fiscal 2021 results, along with year-over-year uptick in both the top and bottom lines, buoy optimism. Continued strength in its Biologics arm in the quarter under review is encouraging as well. Robust performances by the Clinical Supply Services, and Softgel and Oral Technologies segments also raise our optimism. Expansion of both margins bodes well.
Regulatory Requirements: The healthcare industry is highly regulated, with Catalent and its customers being subject to various local, state, federal, national and transnational laws and regulations, which include the operating, quality, and security standards of the FDA and the DEA, among others. Any future 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, or withdrawal of existing or denial of pending approvals, permits or registrations, including those related to products or facilities.
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.
Catalent is witnessing a positive estimate revision trend for 2021. In the past 90 days, the Zacks Consensus Estimate for its earnings has moved 0.6% north to $3.51.
The Zacks Consensus Estimate for the company’s first-quarter fiscal 2022 revenues is pegged at $1.01 billion, suggesting a 19.9% improvement from the year-ago quarter’s reported number.
Other Key Picks
A few other similarly-ranked stocks from the broader medical space are Henry Schein, Inc. HSIC, Intuitive Surgical, Inc. ISRG and West Pharmaceutical Services, Inc. WST.
Henry Schein’s long-term earnings growth rate is estimated at 13.9%. The company presently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Intuitive Surgical’s long-term earnings growth rate is estimated at 9.5%. It currently holds a Zacks Rank #2.
West Pharmaceutical’s long-term earnings growth rate is estimated at 27.3%. It currently carries a Zacks Rank #2.
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