Paradigm Capital slashes price target on ProMetic Life Sciences, but maintains “Buy”

A “significant unanticipated” delay has Paradigm Capital analyst Rahul Sarugaser aggressively cutting his target on ProMetic Life Sciences (TSX:PLI), though he still rates the stock a “Buy”.

On Wednesday, ProMetic reported its fiscal 2017 results. Included in the press release accompanying the numbers was an announcement that announced that the FDA had requested additional manufacturing data for its BLA for plasminogen. As a result, the company will not receive approval by its PDUFA date of April 14. ProMetic says it plans to run the additional validation lots over the summer, and provide the data to the FDA in the fourth quarter of 2018, which it expects should result in a new PDUFA date in early 2019. Shares of Prometic fell 29 per cent Thursday to close at $0.88.

In a research update to clients today, Sarugaser maintained his “Buy” rating, but cut his one-year price target on the stock from $4.25 to $1.75, implying a return of 91 per cent at the time of publication. The analyst explained the reasoning behind the decision.

“Due to the significant unanticipated delay in plasminogen approval, we have revised our valuation of PLI,” he commented. “In summary, we have scaled back our assumptions driving plasminogen’s value, providing an NPV of $565M. Similarly, we calculate an NPV for IVIG at $163M, 4050 for IPF at $568M, and 4050 for Alstrom at $10M. The sum of parts provides a total value for PLI of $1.3B. We further calculated a conservative equity raise of $50M at $0.90/sh, resulting in a full share count of 763M, thus deriving a per-share value of $1.74 (which we round to $1.75).”

Sarugaser thinks ProMetic will generate EBITDA of negative $109.9-million on revenue of $31.5-million in fiscal 2018.