Acerus Pharmaceutical has a huge upside, Mackie Research says

After completing a new financing round, specialty pharma company Acerus Pharmaceuticals (Acerus Pharmaceuticals Stock Quote. Chart TSX:ASP) retains its “Speculative Buy” rating and target price from Mackie Research analyst André Uddin who updated his coverage of the stock on Friday.

Toronto-based Acerus on Friday announced the closing of a non-brokered private placement of 23.2 million common shares to directors and management at a price of $0.195 per common share for proceeds of approximately $4.53 million. The company says that it intends on using the money to support a royalty buy-out for its Natesto nasal gel technology, to build inventory in preparation for a European launch of Natesto and to fund ongoing operations.

Uddin notes that the deal comes at a premium to the stock’s current share price.

“Acerus has closed a private placement of $4.53 million at $0.195 with management and the board – 34 per cent above the current share price – a rarity,” Uddin writes.

“To be conservative, we are lowering our Natesto revenue estimates in 2019 and 2020 and keeping our estimates for outer years intact. We are also reducing our estimates for Acerus’ OTC segment (including UriVarx and Elegant) across the board,” he says.

Uddin says that potential near-term catalysts for Acerus include: Natesto to be launched in South Korea at the end of Q1 or early in Q2; approval by the European Medicines Agency of Natesto in the near future with Acerus making its first shipment in late 2019; updates on the company’s out-licensing of its THC-rich cannabis oil product, expected in Q2; and the launch of Avanafil, Lidbree and Elegant in Canada in 2020.

The analyst has lowered his revenue and EBITDA estimates, calling for 2019 revenue and Adjusted EBITDA of $12.2 million and negative $3.2 million (previously $16.0 million and negative $2.1 million) and for 2020 revenue and Adjusted EBITDA of $20.3 million and $0.4 million (previously $25.5 million and $2.4 million).

His “Speculative Buy” rating comes with a reiterated target of $0.50, which amounts to a 12-month return of 245 per cent at the time of publication.