Yesterday, Merus Labs announced it had close a previously announced bought-deal financing. Merus issued 19,672,200 common shares at a price of $3.05 per share for gross proceeds of $60,000,210. A greenshoe clause means the deal could come in at just over $69-million.
Walewicz says the financing could be something of a game changer for the company.
“With the completion of this financing, Merus now has a very strong balance sheet available to execute on new deals,” he said. “By our estimates, using only cash and debt, the company could increase the size of the business by 50% and maintain its Net Debt/EBITDA below 2.0x, and it could more than double the size of the business while staying below 3.0x. We believe that the company is now very well positioned to execute on new transactions in 2015.”
Founded in 2011, Toronto-based Merus Labs is a specialty pharma with a portfolio of three products, Sintrom, Enablex, and Vancocin, it markets in Canada.
Walewicz says he isn’t yet factoring any new deals into his outlook on Merus and says he prices the company at a discount to its peers, based on it current portfolio. But the analyst says he sees “considerable upside” if it can execute on new deals.
In a research update to clients yesterday, Walewicz maintained his “Buy” rating and one year target of $3.25 on Merus Labs, implying a return of 24.5% at the time of publication.
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