Investors should focus on Prometic Life Science’s (TSX:PLI) deep product development pipeline instead of its predictably lumpy revenue, says Paradigm Capital analyst Alan Ridgeway.
Last Thursday, Prometic reported its Q3, 2014 results. The company lost $20.7-million on revenue of $2.3-million. Management noted that its year to date product sales of $7.3-million is still ahead of 2013’s $6.8-million.
CFO and COO Bruce Pritchard addressed the company’s uneven topline.
“We are still at a stage of our corporate development where our revenues do not yet accrue in a straight line on a quarterly basis as evidenced by these third quarter financial results,” he said. “However, our yearly product sales should continue slightly ahead of last year, and the fourth quarter anticipated licensing revenues should largely compensate as demonstrated by the reiteration of our revenue guidance for the second half of 2014 of over $15-million.”
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Ridgeway says Prometic’s Q3 was essentially in-line with his expectations. He warns that resin sales can be lumpy when viewed on a quarterly basis and says investors should instead focus on the company’s development programs in the months to come. He says he likes the stock’s risk/return profile because it has signed up partners who bring financial and commercial support, because of the “locked in” nature of its resin sales to licensees, and because of the potential upside from partnerships and licensing deals in its therapeutics business.
“Overall, we continue to believe PLI offers one of the best risk/reward opportunities in our universe and believe that investors should be buying the shares ahead of potential upcoming catalysts,” says Ridgeway.
In a research update to clients this morning, Ridgeway maintained his “Buy” rating on Prometic Life Sciences, but raised his one-year target on the stock from $2.90 to $3.10, implying a return of 60% at the time of publication.
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