Medexus gets a target increase from Raymond James

Québec-based specialty pharma company Medexus Pharmaceuticals (Medexus Pharmaceuticals Stock Quote, Charts, News, Analysts, Financials TSX:MDP) received a target price increase from Raymond James on Thursday. Analyst Rahul Sarugaser kept an “Outperform” rating on the stock while lifting his target from $3.50 to $4.00, saying that new bank debt provides a clearer path to minimizing potential share dilution from the company’s convertible debt.

Medexus is a rare disease-focused pharma company that licenses, acquires and promotes near-market and on-market drugs and products in the US and Canada, with a concentration on oncology, hematology, rheumatology and auto-immune diseases. 

The company announced on Thursday a new senior secured credit agreement through BMO for a US$35 million term loan facility and a US$3.5 million revolving loan facility. The term loan includes a yet-to-be committed accordion feature of US$20.0 million that if and when secured should replace 50 per cent of the outstanding, fully-accred US$40 million convertible debt facility.

Medexus said the net proceeds went towards paying off all obligations under the company’s existing senior secured credit facilities which otherwise would have matured in July of this year. 

“Medexus has delivered sequential revenue growth and improving profitability over the past five fiscal quarters, and we are pleased that our new partners at BMO have recognized the strength and stability of our business,” said CFO Marcel Konrad in a press release.

Sarugaser said the move makes the path ahead clearer for Medexus, which had a record quarter for revenue and earnings in its latest release, the company’s fiscal third quarter 2023, delivered in early February.

“We adjust our potential dilution analysis using a 50 per cent likelihood MDP will secure the US$20 million accordion, which in turn would settle 50 per cent of the convertible debt. As such, we reduce our estimate of potential dilution to 75 per cent (was 100 per cent) of the 9.9 million potentially dilutive shares, deriving a revised pro-forma share count of 28.9 million. From this, we calculate a per-share value of $4.06 (rounded to $4), and maintain our Outperform rating,” Sarugaser wrote.

Medexus’ share price dropped from the $6.50 range in mid-2021 to around $3.00 by the end of that year. More recently, the stock has been in the $1.75-$2.50 range.

At press time, Sarugaser’s $4.00 target represented a projected one-year return of 231 per cent.

On the company’s financials, Sarugaser has forecasted MDP’s revenue to go from $77 million in fiscal 2022 to $109 million in 2023 and to $118 million in 2024. EBITDA is expected to go from negative $6 million in fiscal 2022 to positive $15 million in 2023 and to positive $23 million in 2024. The company’s EV/Revenue is now charted at multiples of 1.0x, 0.7x and 0.7x for fiscal year’s 2022, 2023 and 2024, respectively.