Analyst Douglas Loe of Echelon Wealth Partners has lowered his rating from “Speculative Buy” to “Hold” for drug developer ProMetic Life Sciences (ProMetic Life Sciences Stock Quote, Chart TSX:PLI), on Tuesday saying that along with a lengthened timeline for its programs, the company’s quarterly results show a growing financial risk.
Laval, Quebec’s ProMetic delivered its fourth quarter and 2018 year-end financials on Monday, coming in with revenue of $10.6 million and an EBITDA loss of $23.6 million.
“Addressing our material liquidity and balance sheet challenges remains our highest priority. We anticipate that it will most likely require a combination of material corporate, financial and business development transactions to successfully stabilize the financial and liquidity position,” COO and CFO Bruce Pritchard said. “This could include a restructuring of the SALP debt and/or recapitalization transaction, and a significant additional equity financing to finance the Corporation to value-creation catalysts such as partnerships and monetization of non-core assets.”
Loe says even though the company still has an attractive pipeline, it looks like sustained financial risk is going to impact development timelines.
“While we remain positive about ProMetic’s longer-term medical prospects, both with its capture affinity resin-purified plasma products operations (though now limited to soon-to-be-regulatory-stage Ryplazim/plasminogen) and its anti-fibrotic small molecule program led by PBI-4050, financial risk for the firm is intensifying and development timelines on all programs embedded in our model are now confirmed to be pushed forward based on FQ418 commentary,” Loe said in a client update on Tuesday.
Loe points out that PLI’s EBITDA loss of $23.6 million on the quarter has been essentially maintained at that level over the past four or five quarters, with embedded manufacturing expenses taking up much of the blame ($10.5 million over Q4).
ProMetic exited 2018 with $7.4 million in cash and long-term debt of $125.1 million, which translates to $238.8 million of actual debt due on maturity.
“We believe unambiguously high financial risk coupled with extension of clinical/regulatory timelines on Ryplazim/plasminogen and PBI-4050 beyond our previous expectations, we are shifting our rating from Speculative Buy to Hold, while simultaneously reducing our price target from $0.60 to $0.25, with valuation still based on multiples of revised F2025 adjusted EBITDA/fd EPS forecasts,” says Loe.
Loe is now calling for 2019 revenue and EBITDA of $45.8 million and negative $67.2 million and 2020 revenue and EBITDA of $51.3 million and negative $56.1 million. His $0.25 target represents a projected return of 4.2 per cent at the time of publication.