Mackie Research lowers price target on Cardiome Pharma

The licensing of a new product isn’t enough for Mackie Research Capital analyst André Uddin to maintain his enthusiasm for Cardiome Pharma (Cardiome Pharma Stock Quote, Chart, News: TSX:COM, Nasdaq:CRME) in the face of falling comparables.

This morning, Cardiome announced it had reached an agreement with Basilea to distribute and license the antibiotic Zevtera/Mabelio in Europe and Israel.

“The addition of Zevtera/Mabelio to our product portfolio is an important step in our company’s strategic growth as it fits well alongside our previous licence of Xydalba (dalbavancin hydrochloride), which was launched earlier this year. Ceftobiprole allows us to expand our offering of differentiated hospital products to our European customers while increasing the operating leverage within our commercial infrastructure,” said Cardiome CEO Hugues Sachot. “We expect to begin to recognize revenues from Zevtera/Mabelio immediately and our sales force will be ready to accelerate commercialization of this important antibiotic after the successful transition of Zevtera/Mabelio from Basilea to Cardiome in the months to come.”

Uddin explained the deal, which he noted was characteized by what we don’t know about it.

“The financial terms of this deal were not disclosed,” the analyst says. “Zevtera/Mabelio is an i.v. cephalosporin antibiotic with rapid bactericidal activity against a wide range of Grampositive and Gram-negative bacteria. The product is currently approved in 13 European countries for the treatment of adult patients with community-acquired pneumonia (CAP) and hospital-acquired pneumonia (HAP), excluding ventilator-associated pneumonia (VAP). Basilea launched the drug in Europe in mid 2014. CRME did not provide sales guidance of Zevtera/Mabelio. We assume the drug would generate $3M in 2018, $4M in 2019, and $5M in 2020.”

In a research update to clients today, Uddin mantained his “Hold rating, but lowered his one-year price target on Cardiome Pharma from (U.S.) $3.50 to $3.00, implying a return of 23 per cent at the time of publication. The analyst explains his new target is derived from applying a 3.5x multiple to his 2018 sales estimates instead of a 3.5x multiple, due to comparables that have fallen.

Uddin thinks Cardiome will lose $0.79 a share (fully diluted) on revenue of $29.7-million in fiscal 2017. He expects those numbers will improve to a loss of $0.70 per share on a topline of $41.6-million the following year.

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