There’s still tons of upside in Acerus Pharmaceuticals, Mackie Research says

Specialty pharma company Acerus Pharmaceuticals (Acerus Pharmaceuticals Stock Quote, Chart TSX:ASP) has reported an anticipated shortage in its menopause drug Estrace, an event which will have long-term implications for the company’s sales, says Mackie Research analyst André Uddin.

Acerus’s Estrace is being manufactured in the United Kingdom by contract manufacturer Recipharm, whose license for the facility at which Estrace is being produced has been partially suspended, with June 2019 offered by Recipharm as a date to be back online.

Uddin says that while Acerus’ management is working with the manufacturer to see if the drug can be produced at another facility, the analyst believes it likely that Acerus will lose some of its business to generic suppliers as a result and has thereby lowered his sales estimates across the board.

“We expect Estrace sales in Q1 not to be affected as the inventory is likely going to be sufficient,” says Uddin in a client update on Monday. “We anticipate the shortage to lower Estrace sales in Q2 and Q3 before manufacturing is back online. Generic versions of 1.0 mg and 2.0 mg Estrace have been available in Canada. We expect those generics to take a significant portion of Estrace’s market share when Estrace is not available on the market – which would also be difficult for Estrace to regain once the supply issue is resolved. Accordingly, we are also reducing our sales estimates from 2020 to 2027.”

Acerus, whose key product is Natesto, a nasal gel form of testosterone which is being marketed in North America, has seen its share price fall more than 50 per cent over the past 12 months, with ASP down seven per cent in late-day trading on Monday.

Uddin is maintaining his “Speculative Buy” recommendation with the reduced target price of $0.60 (previously $0.65), which represents a projected one-year return of 344 per cent at the time of publication. The analyst has dropped his Estrace sales numbers by 33 per cent for 2019 and by 36 per cent for the years 2020 to 2027. He has dropped ASP’s total revenues by six per cent for 2019, by four per cent for 2020 and by three per cent for 2021. Uddin sees ASP’s fully diluted EPS dropping from negative $0.01 to negative $0.02 in 2019, from $0.01 to $0.00 in 2020 and is forecasting no change for 2021.