Sum-Of-The-Parts Valuation Leads Rodman & Renshaw To Initiate Oasmia Pharmaceuticals At Buy With A $6 Target

Oasmia Pharmaceutical AB - American Depositary Shares (NASDAQ: OASM) enjoyed a healthy spike higher on volume Monday, perhaps due in part to an initiation of coverage from analysts at Rodman & Renshaw.

Analyst Raghuram Selvaraju initiated Oasmia with a Buy rating and a $6 price target. With shares having closed at $3.40 at the end of Friday's trading, this suggests a belief that 76 percent upside lays ahead for this Swedish-based pharmaceutical company.

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In Sevaraju's view, Oasmia presents an interesting opportunity based on four factors:

• Its focus on the development of next-generation formulas of approved drugs.
• The company uses the 505(b)(2) regulatory pathway to secure product approvals, which permits accelerated review and other benefits.
• Oasmia pursues both human and veterinary applications of its products.
• It has the ability to produce truly water-soluble formulations, allowing it to improve on poorly water-soluble chemo drugs.

Using a sum-of-the-parts valuation and assuming a 40 percent effective tax rate, Selvaraju arrived at his $6 price target. He added that the sterile injectable segment is "rife with M&A activity" as well.

Oasmia traded at $3.55 midday Monday, up 4.41 percent from its Friday close.

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