Summary
- Recro Pharma recently received its second CRL from the FDA regarding its IV Meloxicam product candidate. As a result, the company has announced a restructuring of its Acute Care Segment.
- The company plans to rally around its prosperous CDMO segment and expects it to be cash flow positive in 2H of 2019.
- The market welcomed the news about restructuring with the share price showing a reversal and a potential return to pre-CRL trading levels.
- I take a look at the charts to find an entry point and identify key areas for current investors. In addition, I provide my REPH target price for 2019.
On April 3rd, Recro Pharma (NASDAQ:REPH) publicized its decision to cut operating expenses at its Acute Care Segment by reducing employee headcount by 50. This is in reaction to the company receiving its second CRLfrom the FDA concerning its IV Meloxicam candidate. This strategy intends to decrease the cash burn for 2019 while preserving its prosperous CDMO segment. As a result, management expects these actions will lead to the company hitting break-even in Q3 and potentially cash flow positive at some point in 2H of 2019. With regards to Meloxicam, Recro still anticipates the product will ultimately be approved by the FDA and is planning to meet with the agency to determine a path forward. Into the bargain, the company announced it is in search of a commercial partner for IV Meloxicam.
This news was embraced by the market with the stock shooting up over 20% after-hours trading on Wednesday. This positive reaction puts the share price above the 200-day moving average of $7.05 and into the $7.75 area. This abrupt change in the company's strategy and the share price has me looking for entry into REPH. I intend to go over the details of the CRL and why I think the company's strategy is beneficial for shareholders. In addition, I take a look at the charts to find an entry into REPH and identify key levels for current shareholders.
