Recro Pharma Offers A Non-Opioid Alternative For Pain Management; Brean Assumes With Buy Rating

Brean assumed coverage of Recro Pharma Inc (NASDAQ: REPH) with a Buy rating and $21 price target. The firm noted the company focuses on developing non-opioid treatments for the management of acute pain in hospital and ambulatory care settings.

The firm sees IV meloxicam as addressing a market, which had a $5.9 billion opportunity in 2010. Given opioid medication's addictive nature, the firm noted that non-opioid drugs like IV meloxicam holds out promise.

Upcoming Catalysts

Analyst Difei Yang said she looks out to the Phase III readout of IV meloxicam, the company's lead product, to be used in abdominoplasty. The trail results are expected before the end of 2016. The analyst sees this as the next catalyst. If the company keeps up the time schedule, the analyst believes an NDA submission is on the cards by mid-summer 2017 followed by a FDA approval in mid-summer 2017.

Payment Due to Alkermes

IV meloxicam is meant to treat post-operational acute pain and has been licensed from Alkermes Plc (NASDAQ: ALKS), with milestone payments alone amounting to $120 million. Alkermes would also get 10-12 percent of sales as royalty, with a 30 percent reduction post patent expiration. The firm noted that the original formulation IP extends through 2022.

Recro's Financial Commitments

Breans noted that the company guided 2016 revenues to $55 million to $60 million. The firm also highlighted the fact that the company owes $27.3 million of their $50 million of their $5-0 million 5-year secured loan with OrbiMed as of August 8, 2016 as well as $120 million in milestone, net sales and royalty payments. The firm also noted that it raised $13.4 million in equity offering in August, 2016 by selling about 2 million shares at $7.50 per share.