Specialty pharma company Knight Therapeutics (Knight Therapeutics Stock Quote, Chart TSX:GUD) has been trading sideways for over a year now, but shareholders should take heart — the company’s got a “genius” CEO in Jonathan Goodman who may need more time to develop the business at his own speed, says Lorne Steinberg, president and portfolio manager of Lorne Steinberg Wealth Management.
“Knight Therapeutics is run by the amazing Jonathan Goodman, and this is Jonathan’s second act after Paladin Labs, which was a mega-success,” says Steinberg, to BNN Bloomberg.
“About 60 per cent of the market cap is sitting in cash. There’s been some criticism about not spending the cash but Jonathan Goodman has proven himself to be such a brilliant acquirer and spender of money on drugs that he is a shrewd businessman who is undoubtedly waiting for right opportunities,” says Steinberg.
After floating above $10.00 for the first eight months of 2017, GUD has since fallen down to the low-$8.00 range where it has languished for the past 12 months.
In November, the Montreal-based company reported its third quarter 2018 financials, generating a top line of $3.2 million, a 73 per cent year-over-year increase, and net income of $12.9 million, a 260 per cent year-over-year increase. The company exited the quarter with $303 million in cash and cash equivalents.
Over the quarter, Knight announced the acquisition of the Canadian and Israeli licensing for diarrhea drug Mytesi from Jaguar Health, which will see GUD pay up to US$18 million in contingent milestones for the in-licensing and first negotiation rights for the Latin American market.
“I am pleased with our progress at building a specialty pharmaceutical company with products that make a difference in the lives of patients,” said Goodman, in the Q3 press release. “We have launched Probuphine, a novel option to assist in the national health crisis, opioid dependence. We continue to leverage our strong balance sheet to strengthen our pipeline of innovative products as evidenced with the licensing of products from TherapeuticsMD and Jaguar.”
Steinberg says that investors will have to play the waiting game on Knight.
“To own this stock, it’s not because of revenue growth at the present time, it’s because you believe in the genius of Jonathan Goodman and you think that they will spend the cash wisely,” he says.
“I actually do believe in [his] genius —we don’t own the stock at the present time because there’s a lot of stuff that has to happen, but I respect CEOs who are not influenced by the market but have a long-term outlook, and he does,” says Steinberg
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