Knight Therapeutics is now a buy, says Mackie Research

Specialty pharma stocks have been on the move lately, but Montreal-based Knight Therapeutics (TSX:GUD) has lagged behind.

Now’s the time for GUD to catch up, says André Uddin of Mackie Research Capital, who in a July 8 note to clients upgraded his rating from “Hold” to “Buy” with a target price lift from $7.90 to $10.65.

Knight, which focuses on acquiring and in-licensing pharmaceutical products both for Canada and international markets, is currently operating with a strong balance sheet, says Uddin, who sees GUD as a good defensive play.

So far in 2018, Knight has been trading sideways while the company has remained relatively quiet in terms of business development, Uddin says, but look for more from GUD going forward.

“While GUD is profitable, investors should note that the majority of GUD’s profits are from interest income, not product sales – we expect interest income to decrease going forward as GUD receives loan repayments,” says the analyst. “GUD’s total revenues would improve as more products are launched going forward. We believe more notable BD is necessary for the company. Management has been relatively quiet on the BD side for the past year – companies rarely stay quiet for long.”

Uddin thinks GUD’s revenue and fully diluted EPS will rise from $8.6 million and negative $0.15, respectively, in 2018 to $10.7 million and $0.13, respectively, in 2019. His $10.65 target represents a projected return of 28 per cent at the time of publication.