Oculus Innovative, Sciences, Inc. (NASDAQ:OCLS) shares were sent climbing 26% yesterday after the specialty pharmaceutical company announced the sale of its Latin America (LA) dermatology business to Invekra in a cash deal of $19.5 million. In return, Inevkra will pay a 3% royalty on LA sales to Oculus, who meanwhile will also retrain rights in Brazil.

In reaction, Maxim analyst Jason Kolbert reiterates a Buy rating on shares of OCLS while boosting the price target from $7.00 to $8.00, which represents a 63% increase from current levels.

The LA business has added as much as $4 to $5 million to top-line revenue growth for the company, or $1 million in EBITDA.

In light of the loss of LA revenue, the analyst has adjusted his model accordingly to better portray international sales, although he acknowledges a partial 3% royalty offset. Kolbert has raised projected revenue growth in the U.S. while cutting operating expenses, taking the $19.5 million cash deal into account.

The analyst notes, “For Oculus the LA business is low margin relative to the derm business in the U.S. As such the company has traded low-margin revenue for cash, which will be used to drive high-margin revenue and high-margin royalties through growth in the U.S.”

“We believe this approach could significantly reduce operating expenses associated with supporting international sales and distribution. The company plans to grow the U.S. business with continued introduction of more products (one product/quarter), building sales of existing products through additional U.S. reps, and through “gentle” price increases. With reduced operating expenses margins should increase and generate more free cash flow in out years. Overall we believe these changes could drive the company more rapidly to breakeven, potentially by 2019 (from 2020),” Kolbert concludes.

As usual, we recommend taking analyst notes with a grain of salt. According to TipRanks, analyst Jason Kolbert is ranked #4,039 out of 4,173 analysts. Kolbert has a 26% success rate and faces a loss of 16.6% in his yearly returns. However, when recommending OCLS, Kolbert realizes 3.5% in average profits on the stock.screen-shot-11-02-16-at-03-15-pm