Take pass on Knight Therapeutics for now, Mackie Research says

It’s still early innings for Knight Therapeutics (Knight Therapeutics Stock Quote, Chart TSX:GUD), says analyst André Uddin of Mackie Research Capital Corporation, who has full faith that battle-tested CEO Jonathan Ross Goodman will eventually make a success out of the Canadian specialty pharma company.

In a Thursday earnings update, Uddin reiterated his “Hold” recommendation and $8.20 target price, which represented a projected return of nine per cent at the time of publication.

Knight Therapeutics held its AGM on Tuesday, with shareholders voting to re-elect Goodman to the company’s board of directors, quelling the storm brought on when activist shareholder Medison Biotech (which owns 7.3 per cent of GUD) announced in February that it wanted Goodman to step down on allegations of conflict of interest and in the interest of shareholders. The vote re-elected Goodman along with the six other nominees that he had put forward for the board, while Medison’s Meir Jakobsohn withdrew his nomination at the last minute.

The result is good for shareholders, says Uddin who had earlier advocated that “one possible outcome for Knight investors to help assist their company put this issue behind them, would be to consider voting in favour for all of Knight board with the exception of Mr. Jakobson.”

As for GUD’s first quarter results, posted on Thursday, the company took in total revenue of $3.0 million and had a net income of $5.2 million or fully diluted EPS of $0.04 per share. Those results compared to Uddin’s estimate of $1.9 million in revenue (consensus was $3.2 million) and $0.02 per share (consensus was $0.03 per share).

Uddin says Knight looks to continue its conservative but low-risk business development strategy and while slow going, the analyst notes that the company’s path so far looks similar to that of Paladin Labs, Goodman’s previous pharma company that generated 19 consecutive years of record revenue.

“Compared to Paladin’s growth trajectory, we believe GUD is still in the early innings. With a war chest of $622 million, we believe GUD should be very resourceful to obtain products down the road which would fit into the company’s sales platforms in Canada and select ROW markets. We believe GUD patience should pay off eventually,” Uddin says.