Cantor Doesn't Think BioDelivery Sciences Should Be Cutting To Grow, Downgrades Stock To Hold

BioDelivery Sciences International, Inc. (NASDAQ: BDSI) reported in-line 1Q16 EPS of ($0.36). Cantor Fitzgerald’s Chiara Russo downgraded the rating for the company from Buy to Hold, while reducing the price target from $9 to $5. The analyst commented that while there seems to be “underlying fundamental value,” the stock is more driven by sentiment.

Cutting SG&A Could Hinder Top-Line Growth

BioDelivery Sciences was following a strategy of achieving profitability by cutting SG&A rather than R&D. Analyst Chiara Russo said, however, that this could hinder top-line growth.

“Our comfort level around the concentration of RXs from the exclusive TN Medicare contract continues to erode, and we question management's ability to monetize Bunavail given the cut in SG&A, Q/Q RX decline, and continued competitive pressures,” Russo wrote.

Prudent investors are likely to look for alternatives in view of the disconnect between BioDelivery Sciences’ fundamentals and sentiment, the analyst noted.

Pipeline Issues

BioDelivery Sciences’ commercial partner Endo International plc - Ordinary Shares (NASDAQ: ENDP) admitted to the slower-than-anticipated progress in the launch of Belbuca. While both companies attributed this to “a cooling of the opioid space from the CDC issued guidance,” Russo believes it to be product specific.

Although BioDelivery Sciences’ pipeline consists of several products, they are not meaningfully strong commercial assets, the analyst commented.