Knight Therapeutics stock has 30 per cent upside, Mackie Research says

Specialty pharma company Knight Therapeutics (Knight Therapeutics Stock Quote, Chart TSX:GUD) has a new strategic partnership under its belt, the third of its kind this year alone, says Mackie Research’s André Uddin who in a client update on Tuesday maintained his “Buy” rating and $10.65 target for GUD.

Yesterday, Knight Therapeutics announced acquiring the Canadian and Israeli in-licensing of diarrhea drug Mytesi from Jaguar Health, with the right of first negotiation to market Mytesi and Jaguar’s other related products in specified Latin American countries as well. No upfront payment was disclosed, although the agreement will see GUD pay up to US$18 million in contingent milestones.

While Mytesi has yet to be approved in Canada, Uddin suggests the second half of 2019 as a potential start date.

“Mytesi (crofelemer) is a drug approved by the FDA to relieve noninfectious diarrhea in adult HIV patients on antiretroviral therapy,” says Uddin. “The indications of Mytesi could also be expanded to cancer therapy-related diarrhea, congenital diarrheal disorders and short bowel syndrome in infants and children, irritable bowel syndrome, inflammatory bowel disease and cholera.”

“We expect GUD to continue to in-license additional niche products for the Canadian and select rest of the world markets. We believe GUD’s share price should appreciate with new product launches down the road,” he says.

Uddin sees Knight Therapeutics generating revenue in 2018 of $9.1 million and a fully diluted earnings per share of negative $0.15 and revenue in 2019 of $15.2 million and an fully diluted EPS of $0.15. For 2020, he expects revenue of $34.0 million and a fully diluted EPS of $0.21.

Uddin’s target price of $10.65 represents a projected return of 30 per cent at the time of publication.