Cipher Pharmaceuticals has a 155 per cent upside, Mackie Research says

Expect top line growth to reaccelerate for Cipher Pharmaceuticals (Cipher Pharmaceuticals Stock Quote, Chart TSX:CPH), says Mackie Research analyst André Uddin, who calls CPH a cheap pickup for investors.

Canadian specialty pharma company Cipher released its fourth quarter and full year 2018 financials on Tuesday, with president and CEO Robert Tessarolo calling it a transformational year.

“In 2018 we diversified our portfolio through the execution of several strategic business transactions. Most importantly, we advanced product approvals, launches and Health Canada filings and have added five highly innovative assets with clear advantages versus current standards of care, with low regulatory risk given prior FDA approval and promising commercial and reimbursement profiles,” states Tessarolo in a press release.

“While investing in our future growth we continued our debt retirement practices through practical management of expenses and our ability to generate significant cash from operations,” he says.

For the quarter, CPH posted total revenues of $6.4 million, which came in-line with Uddin’s and the Street’s estimate of $6.6 million (compared to $12.2 million last year). (All figures in US dollars unless otherwise noted.) The company had a net income loss of $0.5 million or fully diluted EPS of negative $0.02 per share, which was weaker than Uddin’s estimates of $0.2 million or $0.01 per share, respectively.

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Cipher’s Canadian revenues were $1.8 million, an area that Uddin sees as central to the company’s growth going forward.

“We view this segment as Cipher’s long-term growth driver. Cipher is expected to launch five new products in Canada in the next two to three years, including Xydalba (to be launched in H1), Trulance (under review), A-101 (under review), Trevyent (to be filed for approval), and MOB-015 (in Phase III trials with results expected in Q4). Our estimates suggest combined sales of these 5 products would grow from $1.6 million in 2019 to $31.6 million in 2027 (a CAGR of 45 per cent). Cipher is also looking to acquire additional four products in the next two years,” says Uddin in a note to clients on Tuesday.

Uddin has lowered his estimates for its acne drug Absorica due to a launch this year of a new formulation and, in turn, has lowered his target price (while maintaining his “Buy” rating) from C$5.30 to C$4.65, now representing a projected 12-month return of 155 per cent at the time of publication.