With most stocks well off their 12-month highs, there are plenty of potential wins in the market these days, but for investors willing to set their horizons a bit wider than the current COVID-19 pandemic, specialty pharma company Knight Therapeutics (Knight Therapeutics Stock Quote, Chart, News TSX:GUD) might be the ticket.
So says fund manager Lorne Steinberg, who calls GUD a quality name for the patient investor.
“Knight Therapeutics is run by the very brilliant Jonathan Goodman, who did a great job with his past company and sold it to [Endo Health] and shareholders as well,” says Steinberg, president and portfolio manager at Lorne Steinberg Wealth Management, who spoke on BNN Bloomberg on Tuesday.
“Knight is sitting with a lot of cash for the simple reason that Jonathan Goodman is a value investor when it comes to investing in drugs,” he said. “We don’t own the stock but I have to say he is a patient fellow and that company will be built slowly over time as he sees value.”
“I like the fact that he’s not a CEO who is simply chasing acquisitions to spend cash, so you have to be a patient investor,” Steinberg said.
Knight Therapeutics made its first big splash last fall with the purchase of oncology-focused Latin American drug company Grupo Biotoscana Investments for $418 million.
The move which transformed Knight into a pan-American drug company was initially well received by the market but GUD’s share price quickly reverted to its base in the $7.00 range. The market tumble over February and March took GUD down as low as $4.70 but the stock has by now recouped virtually all of its lost ground, currently trading in the mid-$7.00 range.
Knight reported its fourth quarter and full-year 2019 earnings on March 30, which featured $47.5 million in revenue, up 280 per cent from 2018, and net income of $18.0 million compared to $24.0 million a year earlier.
The company ended the year with cash and equivalents of $174 million compared to $245 million at the end of 2018.
Along with the expansion into Latin America, 2019 saw Knight advance its Canadian pipeline with the in-licensing of three new drugs along with regulatory approval for two more products and three pending submissions.
In his quarterly commentary, Goodman called 2019 a transformative year for Knight in its mission to become a ‘rest of the world’ specialty pharmaceutical company. “Looking ahead, we remain committed to supplying the medicines our patients need as our community faces an unprecedented health crisis, and will continue leveraging our strong balance sheet to build a business our shareholders can be proud of,” Goodman said.
Commenting on the fourth quarter and 2019 year for Knight, Stifel GMP analyst Justin Keywood said Knight looks to be replicating Paladin’s success in terms of record yearly revenue.
The analyst has a “Buy” rating and a one-year target price of $10.50 on GUD.
Last week, Knight announced the closure of its Normal Course Issuer Bid started last July which has seen the company repurchase 12 million common shares or about ten per cent of the public float.