Cardiome Pharma is a buy, says Mackie Research

Cardiome Pharma Corp. (Cardiome Pharma Stock Quote, Chart, News: TSX:COM, Nasdaq:CRME) may have had a weak Q4, but the commercial-stage specialty pharma company is so far gaining traction in 2018, says André Uddin, analyst with Mackie Research.

In an update to clients on Wednesday, Uddin reiterated his “Speculative Buy” rating and $2.80 (all figures in US dollars unless noted) target price for Cardiome, representing a potential return of 69 per cent at the time of publication.

On Tuesday, Cardiome reported its Q4/17 and full year 2017 financial results, showing Q4 revenues at $7.0 million versus Reuters consensus of $8.4 million and compared to $7.0 million last year. Q4 also reported a net income loss of $8.3 million versus consensus of $6.4 million and compared to $5.6 million last year.

In response, Uddin has trimmed his 2018 estimates but still sees positive momentum ahead for Cardiome, particularly with reference to Xydalba, a skin infection drug, and the in-licensing of a legacy drug this year, which could turn the company cash flow positive.

“CRME is actively promoting Xydalba and its other products in Europe through a team of 45 sales reps and 11 medical liaisons,” says the analyst. “The company has two sales reps in Canada. We believe the uptake of Xydalba sales should accelerate as more European hospitals add this drug on their formularies.”

Cardiome holds $39.0 million in debt, which Uddin sees as elevating the company’s financial risk. Nevertheless, the analyst believes CRME to have a favourable risk/reward profile and has selected the stock as one of Mackie’s top picks for 2018.

Uddin puts CRME’s FY18 and FY19 sales estimates at $29.3 million and $44.6 million, respectively, revised downward from a previous $32.3 million and $44.6 million, respectively.

The analyst’s valuation is based on applying a 3.8x EV/Sales to his 2019 sales estimates and discounting back by 20 per cent.