Pediapharm has 69% upside, says Mackie Research Capital

This morning Pediapharm reported its Q1, 2017 results. The company lost $1.11-million on revenue of $2.47-million, a topline that was up 176 per cent from the $893,161 the company reported in the same period last year.

“Now that Pediapharm has positioned itself with a strong portfolio of products as shown above, for which all of the regulatory investments are behind, the Company’s core strategy regarding business development has recently evolved to focus more on acquisitions of products with existing sales and on co-promotion for products already approved in Canada,” the company said in a press release. “The key objective is to generate profitability in a timely fashion while waiting for Health Canada’s decision on Cuvposa(TM), which is expected before October 2017. In parallel, Pediapharm will still assess additional exclusive licensing agreements (commonly known as “in-licensing”) as well as potential product acquisitions.”

Uddin notes that Pediapharm’s revenue number of $2.5-million beat the $2.0-million topline figure he had modeled. He says the company’s strong sales growth should be sustainable, even without adding new products to the mix, although that is also a real possibility.

“We believe PDP’s current products should sustain the company’s organic growth. We expect the sales of each drug to continue to grow and the company’s total revenues to top C$28M in FY2022. More drug acquisitions should accelerate the company’s growth,” the analyst says. “In June, PDP completed a $5M private placement that should bankroll future product acquisitions. Based on our estimates, PDP should turn profitable around CY2018 – 2019. More drug acquisitions could bring the timing forward.”

In a research update to clients today, Uddin maintained his “Speculative Buy” rating and one-year price target of $0.50 on Pediapharm, implying a return of 69 per cent at the time of publication.

Uddin thinks Pediapharm will lose $0.02 a share, on a fully diluted basis, on revenue of $11.5-million in fiscal 2018. He thinks the company will earn $0.01 on a topline of $15.7-million the following year.