Acerus Pharmaceutical gets a target price reduction from Mackie Research

A second Health Canada Notice of Deficiency on its estrogen and probiotic drug Gynoflor is cause for a target price reduction for Acerus Pharmaceuticals (TSX:ASP), says André Uddin, analyst for Mackie Research Capital, who is nonetheless confident that the company can turn things around.

Last week, Acerus stated that its new drug submission for Gynoflor had been rejected a second time by Health Canada (Acerus had originally submitted an NDS for the drug in February 2017, receiving the first NOD in December 2017). The specialty pharma company did not disclose the reasons for Health Canada’s new rejection but President and CEO Ed Gudaitis stated that Acerus is “disappointed” with the decision.

“GynoflorTM is currently approved in over 40 countries across Europe, Asia, the Middle East, Africa and South America and we are understandably surprised that we could not obtain approval in Canada,” said Gudaitis, in a press release . “We will study the details of the Notice and work with Medinova AG, the manufacturer and licensor of GynoflorTM, to assess our next steps.”

Uddin says that he is reducing his target from C$0.60 to C$0.50 but maintaining his
“Speculative Buy” rating.

“To be conservative, we are taking out our sales estimates for Gynoflor from the model,” said Uddin in a client update on January 25. “Accordingly, our bottom-line estimates for Acerus are also being lowered across the board.”

“We are confident that ASP’s new CEO has the ability to turn the company around –management is working actively on the BD side to find new products to fill in the gap. Both the new CEO and CFO are aligned with shareholders given their significant share purchases in the market,” he says.

Uddin forecasts 2019 fully diluted earnings per share of negative $0.02 on revenue of $16.9 million and 2020 fully diluted earnings per share of $0.00 on a top line of $27.3 million. His new target price represented a projected 12-month return of 310 per cent at the time of publication.