A new deal by Canopy Growth is clear evidence that cannabis research and drug development company Tetra Bio-Pharma (Tetra Bio-Pharma Stock Quote, Chart TSXV:TBP) is undervalued, says analyst Rahul Sarugaser of Paradigm Capital, who in a research update to clients on Thursday maintained his “Buy” rating and 12-month target of $1.75.
Industry leader Canopy Growth announced on Thursday the acquisition of German-based C3 (Cannabinoid Compound Company), a synthetic THC (dronabinol) producer and research company, for $343 million. C3 comes with $41.5 million in sales last year and approximately 19,500 patients treated.
Sarugaser points to similarities between C3 and Quebec’s Tetra Bio-Pharma, as the latter has a number of dronabinol-based candidates currently in FDA clinical trials, including PPP002, which the analyst contends is on the cusp of launching a bioequivalence-oriented study to be commenced in Q3 2019.
“This $343M investment in C3 by Canopy Growth is a strong comparable for TBP, which is developing advanced formulations of the same drug (dronabinol) for the US market— three times larger than that addressed by C3, in addition to its suite of candidates engaged in late-stage clinical testing (e.g., CAUMZ Phase 3 in terminal cancer pain). We see TBP as the next GW Pharma (GWPH), and a close peer of C3, underscoring the market’s clear undervaluation of this world-class biopharmaceutical company,” says Sarugaser.
The analyst sees TBP generating zero in revenue in 2019 and an EBITDA loss of $11.0 million. His $1.75 target represents a projected return of 161 per cent at the time of publication.
“While many cannabis companies simply announce their intentions to pursue clinical trials, this pursuit has been the foundation of TBP’s operations from day one. TBP’s industry-leading research and deep knowledge of global regulatory structures are key drivers putting it at the vanguard of the cannabis biopharmaceutical arena,” he says.