Plug Power Inc (NASDAQ:PLUG) and Innocoll Holdings PLC (NASDAQ:INNL) are two of the biotech world’s standout risers this week following new agreements that have incited investors to take an investment leap. With spotlight on Plug’s massive triple threat Amazon deal and Innoccoll’s entered agreement with Gurnet set to buy the specialty pharma company, FBR analysts are chiming in with divided insights. Let’s dive in:
Plug Power Gets a Boost
Plug Power shares rumbled through the market yesterday at 73% rocket speed once investors caught word of the hydrogen fuel cell maker’s tri-part deal with Amazon, in a commercial-transaction-tech triple threat collaboration.
FBR analyst Carter Driscoll believes the “importance of Amazon endorsement cannot be overstated,” enthused that the alliance could prove to be “very beneficial to PLUG over time.” Spotlighting ramped up revenue visibility as well as prospective for future multisite deals, “with other customers recognizing the value that Amazon sees,” Driscoll has become even more confident on PLUG’s prospects.
On back of the multi-power agreement, the analyst reiterates an Outperform rating on shares of PLUG while upping the price target from $2.50 to $3.00, which represents a just under 37% increase from where the stock is currently trading. Additionally, the analyst tweaks his revenue as well as EPS forecasts for the year and the next slightly upward.
Commercially, Amazon intends to maximize synergy between PLUG’s GenKey turnkey solution and its fulfillment network, purchasing all goods and services with cash that could spur around $70 million in revenue for the year. Transaction-wise, Amazon has the warrants to buy a maximum of close to 55.3 million common shares.
With regards to the technology component of the deal, which is the part of the agreement that most excited PLUG CEO Andy Marsh, “While we do not have many details, we hypothesize that it may involve commercial vehicle applications, such as range extenders or even, more speculatively, drone applications,” adds the analyst, who sees these collaborative efforts as “key” for PLUG’s compelling direction.
Driscoll underscores, “In our view, the agreement with Amazon sends a very clear signal—to both investors and potential customers—that PLUG has the best turnkey material-handling solution and can help improve Amazon’s warehouse productivity. Various third-party market forecasts estimate that Amazon may have accounted for as much as 40%–45% of U.S. e-commerce revenue spending in 2016. Products rapidly flow through Amazon’s fulfillment/distribution centers, and Amazon is expanding into new businesses, such as grocery stores, where perishable goods need efficient distribution and quick delivery.”
Ultimately, “We believe the agreement, with the No. 1 ecommerce player globally, is potentially a transformative one for PLUG,” Driscoll contends.
According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, Carter Driscoll is ranked #4,410 out of 4,553 analysts. Driscoll has 38% success rate and loses 10.0% in his yearly returns. However, when recommending PLUG, Driscoll earns 35.4% in average profits on the stock.
TipRanks analytics show PLUG as a Buy. Out of 2 analysts polled by TipRanks in the last 3 months, both are bullish on Plug stock. With a return potential of nearly 6%, the stock’s consensus target price stands at $2.38.
Innoccoll Holdings Leaps Twice, But FBR Stays on the Sidelines
Innoccoll Holdings jumped 20% yesterday after the specialty pharma company revealed it has come to final M&A terms with Gurnet Point to acquire INNL in a $1.75 per share cash deal, with a $4.90 cap in cash from a contingent value right (CVR). This translates to a collective prospective per share value hitting a $6.65 ceiling, or up to approximately $209 million in aggregate. Moreover, Innocoll will gain a $10 million term loan from Gurnet amid the duration of the offer, with the loan intended for future development for the company’s post-operative pain drug Xaracoll.
Additionally, shares rose 11% on March 29th following an exciting regulatory stride forward for Xaracoll after the firm met with the FDA in a formal Type A meeting to discuss next steps for the NDA submission. Yet, FBR analyst Edward White continues to be sidelined on Innoccoll despite the recent sharp rallies in the stock, reiterating a Market Perform rating on shares of INNL without listing a price target.
Particularly, the analyst questions the financial picture of the company. Yet, Innocoll expects Gurnet’s loan can offer the lift in capital it needs to resubmit the NDA for Xaracoll. Should the product candidate get the green light on back of a resubmission by the close of the year, INNL could be well set up to commercialize Xaracoll by the end of next year.
“The FDA indicated that the company is required to conduct an additional short-term pharmacokinetic study and other several short-term non-clinical toxicology and biocompatibility studies. This language is similar to what management had been expecting as per the March 16, 2017 press release. In the resubmission, the company will include data from these studies along with additional information required to address the new combination product designation and other chemistry, manufacturing and control (CMC) issues. The company believes that the studies can be completed in time for a YE17 NDA resubmission, assuming that the company is adequately financed, which remains a question. We note that management confirmed in mid-March that it is investigating strategic options that may or may not lead to an offer for the company,” White explains.
As usual, we recommend taking analyst notes with a grain of salt. According to TipRanks, Edward White is ranked #4,357 out of 4,553 analysts. White has a 36% success rate and faces a loss of 6.2% in his yearly returns. When recommending INNL, White forfeits 81.8% in average profits on the stock.
TipRanks analytics indicate INNL as a Hold. Based on 3 analysts polled by TipRanks in the last 3 months, all 3 maintain a Hold on Innocoll stock. The 12-month average price target stands at $2.00, marking a nearly 9% downside from where the stock is currently trading.