Teligent: Shift From Deal-Making To Delivery Should Be Good For Investors

| About: Teligent, Inc. (TLGT)
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Set to report, good execution can help set the company apart from the broader weakness seen in the generic drug names.

Pipeline is strong and more clarity on the pricing should be cheered by the market.

Spending may be high for the quarter, partly due to capacity expansion, but stable margins and cash position may ease concerns.

Teligent (TLGT) is set to report later this week and looking at the stock performance, mostly flat over the past year, investors will be keenly waiting for things to cheer about. But rather than emphasizing on the short-term trends, fundamentals suggest a consistent execution on the path so far might be the best way forward and investor overreaction might be an opportunity worth monetizing.

As a specialty generic pharmaceutical company, focusing on topical pharmaceutical OTC and cosmetic products, providing contract manufacturing and formulation services, besides developing manufacturing and marketing a range of generic pharmaceutical products under its label in topical injectable complex and ophthalmic dosage forms, the stock may continue to lack the cache of a typical biotech name, but now that investors are not shunning the low-beta healthcare names, the name is worth keeping on the radar.

The stock, up more than 400% since the current management took over in 2012, may seem range-bound like some of the large competitors - Taro (NYSE:TARO), Mylan (NASDAQ:MYL) or Allergan (NYSE:AGN) - in the generic space. But clarity on growth, profitability and pipeline, for e.g. the pace of roll-out of new products or clarity on the top line growth expectations of more than 40%, may allow the stock to break out.

A good pipeline, especially for a small-cap name

Like any other generic business model, i.e. find a drug losing its patent protection, make a copy and submit the new products to the FDA fast and get them on shelves at a discount, the key for long-term success is building and maintaining a pipeline, which the company seems to be doing well, especially given the small size of the operation.

Compared to the company's target of submitting at least 15 ANDAs for FDA approval through internal product development program during the current year and submitting at least 8 regulatory filings with Health Canada in 2016, the pace seems decent so far.

The company had 34 ANDAs filed with the FDA having an addressable market worth $1.5 billion at the end of last quarter, submitted three ANDAs during first quarter, received 6 approvals from FDA year-to-date, had 4 ANDSs on file with Health Canada at the end of last quarter and more than 30 product candidates at different stages of the development pipeline. In 2014, the company bought a portfolio of 18 discontinued and withdrawn NDAs and ANDAs from AstraZeneca (NYSE:AZN) and in March of this year, the first product (Cefotan) was approved and launched. The product base is diversifying, with more than 35 SKUs in the U.S. and almost a similar number in Canada, significantly up from 10-11 SKUs in the market at the end of first quarter last year.

A decent execution so far may get reiterated

The company has been able to deliver consistent growth, especially after the current CEO took over, and barring short-term volatility there is limited doubt right now. The revenues grew 47% last quarter, on the back of continued growth of the base business and decent performance from the contract manufacturing business. Adjusted EBITDA improved despite an elevated spending on the R&D.

Pricing has been a concern, mostly due to new market entrants; but given the company usually plays the role of a new entrant, thus the market disrupter, and the after effects of the customer consolidations seen over the past few years seem to be easing, there should be positive developments on the pricing front.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.