Analysts called a recent stock sell-off at Embecta (Nasdaq:EMBC) “unwarranted” and believe the company is moving in the right direction despite recent challenges.
Late last year, Embecta filed with the state of Massachusetts to confirm a workforce reduction affecting 118 employees. This related to the company’s plans to discontinue its insulin patch pump program and restructure. The discontinuation of the patch pump program came not long after rumors of the company exploring a sale began circulating in July.
BTIG’s Marie Thibault, Sam Eiber and Alexandra Pang spoke with Embecta CEO Devdatt Kurdikar, CFO Jake Elguicze, and head of investor relations Pravesh Khandelwal earlier this week. The analysts say the company remains on track to complete its restructuring, which includes discontinuing the patch pump.
“We believe that [Embecta] is heading in the right direction and think that the stock sell-off in the past two days is unwarranted,” the analysts said.
EMBC shares are down more than 7% over the past five days, selling at under $19 apiece by midday trading today.
The analysts wrote that the R&D savings associated with restructuring, plus reduced separation-related activities (from Embecta’s spin-off from BD), enable the company to repay debt more quickly. They say management considers this a significant target for the company.
For future growth opportunities, the analysts say Embecta has its sights set on GLP-1 therapeutics. The company recently launched its small-pack pen needle products in Germany, targeting GLP-1 users with a specific label. It plans to expand that offering into other regions as patients move from auto-injectors to pen injectors. Those regions could include Europe, Canada and Australia.
Additionally, the analysts say Embecta is engaging in discussions with more than 10 generic GLP-1 manufacturers. The company aims to co-package pen needles with the generic drugs.
“Management believes that expanding into GLP-1 administration represents one of the largest organic growth opportunities for EMBC. Additionally, EMBC expects emerging markets to continue being a source of growth,” the analysts say.
Looking ahead, the analysts say Embecta plans to explore broadening product offerings. That includes leveraging manufacturing capabilities and a strong commercial footprint.
“We view EMBC as a value story that is focused on generating cash, paying down debt, returning cash to shareholders via a quarterly dividend, and eventually may consider M&A and other capital allocation opportunities,” the analysts said.
