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On Wednesday, JPMorgan updated its stance on Torrent Pharma (TRP:IN), revising the company’s price target to INR 3,650 from INR 3,700, while sustaining a Neutral stock rating. The adjustment follows Torrent Pharma’s fourth-quarter results, which saw the company’s revenues fall short of expectations by 4%. Despite the revenue shortfall, Torrent Pharma’s adjusted EBITDA margins outperformed, reaching 33.2%, a 100 basis points increase year-over-year, and surpassing both consensus and JPMorgan’s own estimates by 30 basis points and 50 basis points, respectively.
The performance was attributed to a gross margin beat. In the domestic market, Torrent Pharma experienced a robust growth of 12% year-over-year, outpacing the industry by 470 basis points. Conversely, the company faced a 6% year-over-year decline in Brazil, primarily due to currency depreciation. Torrent Pharma’s management has signaled a potential rise in R&D expenditure by 50 basis points, focusing on more complex products.
The company’s progress with Semaglutide, a diabetes treatment, was also highlighted. Torrent Pharma is poised to introduce the product in India as part of the initial launch wave. However, it anticipates that approval timelines could remain uncertain in Brazil. JPMorgan’s analysts noted Torrent Pharma’s consistent performance in branded markets, solid margin delivery, and robust cash flow generation, which is expected to position the company to be debt-free by the first half of FY27.
Despite these positive indicators, JPMorgan cautioned that the current valuation of Torrent Pharma at 25 times and 22 times FY26/27E EV/EBITDA suggests limited room for stock price appreciation. Consequently, the firm’s FY27E EBITDA forecast has been adjusted downward by 2% to accommodate the anticipated increase in R&D spending. The revised price target reflects these considerations while maintaining a neutral position on the stock’s outlook.
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