TSO3, Cipher Pharmaceuticals are top second half picks from Echelon’s Loe

In a special report to clients this week, Echelon Wealth Partners healthcare and biotech analyst Douglas Loe revealed his top picks for the second half of 2016.

The analyst has two picks, low-temperature sterilization system developer TSO3 (TSO3 Stock Quote, Chart, News: TSX:TOS), and dermatology-focused specialty pharmaceutical firm Cipher Pharmaceuticals (Cipher Pharmaceuticals Stock Quote, Chart, News: TSX:CPH, Nasdaq:CPHR). In his most recent report on TSO3 yesterday, Loe projected a 91.7 per cent return with a $6.25 target. And in another report, also issued yesterday, he projected a return of 83.2 per cent on Cipher, with a (U.S) $10.50 target.

Loe says forces are aligning at TSO3 that should allow the company to continue to build on the already impressive returns it has delivered in 2016.

“With most global regulatory risk now stripped away from TSO3’s VP4 sterilizer, and with a committed global channel partner in place, we believe strong unit backlog build-out is imminently achievable in FH216 and we project that this can translate into tangible unit sales growth during that period,” says the analyst.

Loe says the formal FDA recognition of the company’s endoscope sterilization capabilities confers differentiated regulatory status on VP4 that he expects to accelerate the capture of market share.

The analyst says Cipher may grow both organically and through acquisitions.

“For Cipher, we are correspondingly confident that US/Canadian sales efforts for its existing commercial dermatology portfolio can translate into tangible sales growth in FH216, but new pipeline candidates if acquirable on attractive terms could augment sales growth by end-of-year,” says Loe.

Loe says Cipher’s modest returns this year could look like a warmup if it builds on the brand equity that lead US isotretinoin formulation Absorica has already created and uses the free cash flow that Absorica product sales generate to fund strategic acquisitions.