Cipher Pharma has a huge upside, says Echelon Wealth

Look for Cipher Pharmaceuticals (Cipher Pharmaceuticals Stock Quote, Chart TSX:CPH) to break out of its slump in 2019, says Doug Loe of Echelon Wealth Partners.

Loe gives a 12-month return of 257 per cent for the stock, saying the specialty pharma company’s pipeline prospects are encouraging.

Cipher Pharmaceuticals released its fourth quarter and fiscal 2018 year end financials on Tuesday, generating consolidated revenue of $6.4 million, which was up sequentially from $4.8 million in Q3 but lower than the $7.0 million in Q2. The variation should be chalked up to fluctuations in revenue from the company’s acne drug Absorica, says Loe, who calls the Q2 a seasonally strong quarter for the drug. (All figures in US dollars unless noted otherwise.)

Loe says that he was a bit disappointed to see sequential EBITDA compression, as well, where CPH went from $1.4 million in Q3 to $1.1 million in Q4, with G&AA expense figuring prominently in the mix.

“We will maintain our ‘Buy’ rating and price target of C$6.50 on CPH, based on near-term achievable revenue/EBITDA that we expect to be relatively stable in correspondence with Absorica royalty revenue that we expect to be itself stable during our forecast period,” says Loe in an update to clients on Tuesday.

“We are mindful that FDA approvals for generic Absorica formulations (from Allergan, initially, and probably others to follow once Allergan’s six-month market exclusivity period concludes, including new entrant MN-based diversified drug marketer Upsher-Smith Laboratories) are on the horizon, but not until FQ420,” he says.

Loe says that while Absorica should still be the main revenue and EBITDA driver for CPH in 2019 and 2020, other new product launches should offset Absorica’s eventual US revenue share erosion. The analyst is calling for 2019 revenue and EBITDA of $28.7 million and $11.2 million, respectively, and 2020 revenue and EBITDA of $36.4 million and $17.2 million, respectively.

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