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Palantir Up on Report of $44 Million FDA Accord

Palantir reached a deal with the Food and Drug Administration to assist with drug reviews and inspections, a media report says.
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Palantir Technologies  (PLTR) - Get Palantir Technologies Inc. Class A Report shares jumped Monda, after the analytics-software maker garnered a $44.4 million contract from the Food and Drug Administration to assist with drug reviews and inspections, according to a media report.

The three-year deal came from the FDA’s Center for Drug Evaluation and Research and the Oncology Center of Excellence, Bloomberg reported.

Palantir’s software will be used in the drug approval process, possibly including coronavirus treatments, Bloomberg reported. 

The software also could be used to judge the safety of treatments such as hand sanitizer, the news agency said.

The Denver company's stock recently traded at $27.17, up 14%. It has nearly tripled since its September IPO, as investors have piled into software companies.

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Government contracts account for more than half the company’s revenue, and it has taken heat for working with the Immigration and Customs Enforcement agency.

Morningstar analyst Mark Cash likes Palantir but puts fair value at $13, half its current trading level.

“Palantir is making progress in its three stages of customer development, in both growing revenue and expanding margin with new and existing clients,” he wrote last month after Palantir’s first quarterly earnings report as a public company. 

“We believe this is attributed to the firm's efforts to lower previous deployment challenges and broaden the use cases for its software.”

Further, “the firm's transformation into a software vendor from a consulting-led company is evident in the margin improvements, with deployment efficiencies, process automations, and lower travel expenses driving the outperformance,” Cash said.

“While about 93% of sales come from existing customers, ... the company showing a growing sales funnel is crucial for long-term success.”