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These three Canadian biotech stocks are buys, analysts say

ProMetic Life Sciences
ProMetic
Prometic Life Sciences CEO Pierre Laurin

Will this be a banner year for Canada’s Life Sciences sector? After a poor showing in 2016, last year certainly saw a number of success stories, with companies like Fennec Pharma, Aptose Biosciences and Oncolytics Biotech all coming out as top performers.

But biotech investment is never for the faint of heart. Even as scientific and technological advances continue to make the field of health care and disease treatment more productive, drug development is still at root a hit or miss enterprise. For those ready to take the plunge, though, the rewards can be substantial. Here we present three Canadian biotech stocks that analysts say are solid bets for the year to come.

Vancouver-based Cardiome Pharma (Cardiome Pharma Stock Quote, Chart, News: TSX:COM, Nasdaq:CRME) saw its share price take a tumble in 2017, from a mid-year high of $6.06 down to a $1.91 by December’s end. But the company has a number of products that could be growth drivers for 2018.

Last month, Cardiome announced an agreement to commercialize in Russia the drug Aggrastat, used to combat acute coronary syndrome (Aggrastat is currently marketed in 60 countries around the world). And analyst André Uddin with Mackie Research Capital says that Cardiome’s Xydalba (an antibiotic to treat skin infection) and Trevyent (a pulmonary arterial hypertension drug-device combination) will be key factors for the company going forward.

“Cardiome is currently rolling out Xydalba throughout Europe. We assume CRME would launch Trevyent in 2020,” says Uddin. “To be conservative, we have trimmed our total revenue estimates from 2018 to 2020. Without assuming additional product acquisitions, our new estimates of CRME’s total revenues suggest a CAGR of 40% from 2017 to 2020.”

Last month, Uddin’s research update included an upgrade of Cardiome from “Hold” to “Speculative Buy,” raising his one-year price target from (U.S.) $2.20 to $2.80, amounting to a return of 94 per cent at the time of publication.

Another company which had its ups and downs in 2017, Centric Health (Centric Health Stock Quote, Chart, News: TSX:CHH) is on the right path, says Canaccord Genuity analyst Neil Maruoka who likes Centric’s capital-light growth strategy. CEO David Cutler is set to retire this month, which will mean a period of uncertainty to follow, but nonetheless, Maruoka reiterated his “Buy” rating on the stock in a research update last month, with a price target of $1.10, implying a return of 83.3 per cent at the time of publication.

“Although Mr. Cutler is approaching retirement age, we are surprised by the timing of this announcement, particularly during the onboarding of new contracts and the pending entry into Quebec,” the analyst says.

“We believe Mr. Cutler has been instrumental in delivering the company and fashioning the growth strategy for the Specialty Pharmacy segment; however, recent operational challenges have hampered the transitioning of new contract wins, slowing revenue growth over the past few quarters,” says Maruoka. “Until a permanent replacement is identified, we view Mr. Cutler’s departure to be incrementally negative, as we are unsure of the bench strength at Centric.”

Maruoka thinks Centric will generate EBITDA of $18.4-million on revenue of $172.7-million in fiscal 2017. He expects those numbers will improve to EBITDA of $24.6-million on a topline of $207.4-million the following year.

The share price for Laval, Quebec’s ProMetic Life Sciences (ProMetic Life Sciences Stock Quote, Chart, News: TSX:PLI) has been trending upward this past week and more could follow in the weeks and months ahead. That’s according to Maruoka, who believes that despite seeing timelines for drug candidates slip over the past year, the company has a definite upside.

Late in the year, ProMetic announced positive interim data on its IVIG (intravenous immunoglobulin) Phase 3 clinical trials with patients suffering from primary immunodeficiencies, and while the results are still a long way from the end goal of commercialization, Marouka is taking them as a good indicator.

“Generally, we view interim data to be not particularly noteworthy; however, we expect the six-month data from this trial will be sufficient to support a New Drug Submission (NDS) with Health Canada,” the analyst explains. “If approved, IVIG could be ProMetic’s second commercial plasma-derived therapeutic (assuming Ryplazim is approved on April 14, 2018), driving margin expansion and demonstrating the power of ProMetic’s protein extraction technology.”

Maruoka maintained his “Buy” rating on ProMetic and a one-year price target of $4.00, implying a return of 182.7 per cent at the time of publication. Yet the analyst says one risk factor for the company could be its cash burn, which he hopes will decelerate over the upcoming year.

Maruoka thinks ProMetic will generate EBITDA of negative $83.2-million on revenue of $39.5-million in fiscal 2017. He expects those numbers will improve to EBITDA of positive $37.5-million on a topline of $150.4-million the following year.

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About The Author /

Jayson is a writer, researcher and educator with a PhD in political philosophy from the University of Ottawa. His interests range from bioethics and innovations in the health sciences to governance, social justice and the history of ideas.

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