Medexus Pharmaceuticals has an 89 per cent upside, says Echelon

Calling it a compelling opportunity for investors, Echelon Capital Markets analyst Stefan Quenneville provided on Tuesday an update on specialty pharma company Medexus Pharmaceuticals (Medexus Pharmaceuticals Stock Quote, Charts, News, Analysts, Financials TSX:MDP). The analyst maintained a “Speculative Buy” and $3.00 target on the stock, which at press time represented a projected 12-month return of 89 per cent.

Medexus, which operates in the US and Canada and has products such as Rasuvo and Metoject, IXINITY, Rupall, Treosulfan, Tripsan and Gleolan, announced on Tuesday preliminary and unaudited fiscal fourth quarter 2023 results for the period ended March 31, 2023. 

The company is saying Q4 revenue will come in at $28-$28.5 million, good for a year-over-year increase of at least 38.1 per cent. That would put the fiscal year’s total at between $107 and $108 million for a year-over-year increase of at least 39.5 per cent. (All figures in US dollars except where noted otherwise.)

In its commentary, Medexus said IXINITY is continuing to see a positive trend in sales, with the fiscal Q4 representing the best quarter of the fiscal 2023 year for new patient conversions as well as patient retentions. Continuing strong results were also said to be coming from Rasuvo, Rupall and Gleolan.

Looking at the preliminary numbers, Quenneville said the projected revenue would be ahead of the consensus at $27.8 million while slightly below his $28.8 million estimate. 

On stem cell transplantation drug Treosulfan, Quenneville said MDP continues to see delays in the potential US FDA approval but that approval would provide significant upside optionality for investors.

“As the company continues to derive significant operating leverage from its established sales infrastructure, we continue to believe the Company’s top line is poised to grow meaningfully in the coming years via successful growth product launches and label expansions. As such, We continue to view MDP as a compelling opportunity for investors and reiterate our Spec. Buy rating and $3.00/shr target price,” Quenneville wrote.

The analyst’s forecast has Medexus generating fiscal full 2023 revenue and EBITDA of $107.7 million and $16.2 million, respectively, and fiscal 2024 revenue and EBITDA of $121.8 million and $23.0 million, respectively.

On valuation, Quenneville said his C$3.00 target stems from the average of his DCF valuation at a 13 per cent discount rate and at three per cent terminal growth and his 6.0x calendar 2023 EV/EBITDA estimate.

Comparatively, Quenneville said MDP is currently trading at 4.0x calendar 2023 EV/EBITDA, which he said is below its Canadian peers at 7.0x and below the DCF value of the company’s portfolio ex-Treosulfan.