Acerus Pharma is ready to hit new highs, Mackie Research says

With product launches expected this year in Europe, Asia and the Middle East, specialty pharmacy company Acerus (Acerus Pharma Stock Quote, Chart, News: TSX:ASP) is ready to hit new highs, says André Uddin of Mackie Research Capital, who on Wednesday reiterated his “Speculative Buy” rating and C$0.50 target price for Acerus.

Acerus reported its three- and twelve-month ended December 31, 2017, financials on Wednesday, with product revenues for Q4 up to US$1.8 million versus US$1.4 million in Q3 and US$1.6 million for the same period one year earlier.

The company attributes the growth to the ramp up in sales of its testosterone nasal gel Natesto, one of Acerus’ three currently marketed products.

“With continued Natesto prescription growth in the US and Canada, and as our other international partners progress towards market approval, we expect to see an acceleration of our Natesto revenues going forward,” said Luc Mainville, Interim Chief Executive Officer of Acerus, in a press release. “In addition, in order to leverage our close relationship with key opinion leaders and high prescribers across the country, we expect to continue to add to our men and women’s health product portfolio.”

Uddin says that ASP’s Q4 results came in-line with his estimates and that the uptake of Natesto prescription volume is solid.

“Natesto is ASP’s lead product, which is marketed by Aytu Bioscience in the US and ASP’s own sales team (8 sales reps) in Canada,” says the analyst in a client update. “ASP receives a supply price representing 16 per cent of net US sales from Aytu, which should jump to 25 per cent in July 2018. Natesto should be launched in Europe in 2019 and ROW launches should commence in 2018 (South Korea and the Middle East) – the company is entitled to a supply price as a percentage of net sales from their marketing partners.”

Going forward, Uddin notes that Acerus is leveraging its nasal delivery technology for use with synthetic or natural cannabinoids, which could have a number of therapeutic applications.

“The company should launch several branded prescription (Rx) and OTX products in Canada in H2 2018 to 2019, which include Gynoflor for vaginal atrophy & infections (Rx), Elegant for vaginal dryness & pH regulation (OTX), and UriVarx for overactive bladder (OTX). Our estimates suggest the company could turn profitable as early as 2019,” says the analyst.

Uddin projects Acerus’s revenue to grow from US$10.2 million in 2018 to US$18.3 million in 2019 and US$25.8 million in 2020. The analyst’s C$0.50 target price is based on using a DCF methodology and applying a 4.1x EV/Sales valuation to his 2019 revenue estimate. The C$0.50 target represents an 82 per cent projected return at the time of publication.