Catalent (NYSE:CTLT) announced a cooperative agreement with activist investor Elliott Investment Management and separately released an upbeat full-year earnings outlook, even as it reported lower fourth-quarter fiscal results year-over-year.
Under the terms of the agreement, the drugmaker appointed four new independent directors and formed a strategic committee to review its commercial and operational strategy. John Greisch, who has served on the company’s board since 2018, will become executive chairman of the board and head the new committee, which will include two of the newly appointed directors.
Elliott, one of Catalent’s “biggest investors,” agreed to “the usual shutdown, voting, confidentiality and other provisions,” the drugmaker said. Among other things, Elliott will not increase its beneficial ownership above 10% in Catalent, or its aggregate economic exposure beyond 14.9%, according to a regulatory filing from the pharmaceutical maker. Its shares advanced 4.9% in Tuesday’s midday trade.
“The company will continue to take decisive action to strengthen operating performance, increase profitability and create value for all shareholders and other stakeholders,” Catalent Chief Executive Alessandro Maselli said in a statement. “We believe the actions announced today will further position Catalent for long-term growth and success.”
The changes “represent critical steps to ensure Catalent achieves its full potential,” said Elliott Senior Portfolio Manager Marc Steinberg.
For fiscal 2024, the company expects revenues of $4.3 billion to $4.5 billion, while the current consensus among Capital IQ analysts is $4.21 billion. In the fiscal year just ended, revenue fell 11% to $4.28 billion. She forecasts adjusted net income between $113 million and $175 million.
The drug maker reported adjusted earnings of 9 cents per share for the fiscal fourth quarter ended June 30, down from 1.08 cents a year earlier and just short of Street’s view of 10 cents. Revenue fell 17% to $1.07 billion, but beat analysts’ estimate of $1.05 billion.
Sales in the biologics division fell to $406 million from $645 million in the 2022 quarter, primarily “driven by significantly lower year-over-year demand (COVID-19 vaccine),” Chief Financial Officer Matti Masanovich said during a conference call, according to a Capital IQ transcript. Pharmaceutical and consumer health revenues increased to $662 million from $643 million due to the company’s acquisition of Metrics in October, according to Masanovich.
“We continue to make progress in improving our operating performance and winning new business with new and existing customers, including in some of the most exciting areas of the industry, putting us on a path towards more sustainable and profitable growth and exit from the market. fiscal year 2024 in a much stronger operational and financial position,” Maselli said in a statement.
ANALYSTS’ RECOMMENDATIONS
Catalent (CTLT) has an average hold rating and target price range of $39 to $65, according to analysts polled by Capital IQ.
Wells Fargo adjusts Catalent price target to $50 from $43, maintains equal weight rating.
Baird adjusts Catalent price target from $47 to $49, maintains neutral rating.
Morgan Stanley adjusts Catalent price target to $55 from $52, maintains overweight rating.
JPMorgan Chase adjusts Catalent price target from $45 to $48, maintains neutral rating.