Knight Therapeutics needs more products on the market, says Mackie Research

Knight Therapeutics’ (Knight Therapeutics Stock Quote, Chart, News: TSX:GUD) fourth quarter results bested his expectations, but Mackie Research Capital analyst André Uddin isn’t quite ready to call the stock a buy yet.

This morning, Knight reported its fourth quarter and fiscal 2016 results. In the fourth quarter, the company earned $7.9-million on revenue of $1.8-million, a topline that was up from the $300,000 it reported in the same period last year.

“In 2016, we continued to make substantial progress towards building Canada’s leading specialty pharmaceutical company by strengthening our team, our product pipeline and our balance sheet,” said CEO Jonathan Ross Goodman. “In the year ahead, we look forward to advancing our product pipeline, commercializing Movantik in Canada and making a difference to the health of patients.”

Uddin notes that Knight’s Q4 was better than both his and the street’s consensus on both the top and bottom line. But the analyst says he would like to see the company deploy what he thinks is the “cleanest and strongest balance sheet in the Canadian specialty pharma sector” into more offerings.

“In our opinion, the growth of the GUD Knight depends on getting more products on the market, and we believe this would take Knight some time due to the current high price of products and management’s price sensitivity,” he says. “GUD is a defensive play (particularly if the market corrects) due to its clean balance sheet and cash position.”

In a research update to clients today, Uddin maintained his “Hold” rating and one-year price target of $10.75 on Knight Therapeutics, implying a return of four per cent at the time of publication.

Uddin thinks Knight will post EBITDA of negative $6.34-million on revenue of $5.35-million in fiscal 2017.