Knight Therapeutics is still undervalued, Raymond James says

Following the company’s fourth quarter results, Raymond James analyst Rahul Sarugaser has maintained his “Outperform 2” rating on Knight Therapeutics (Knight Therapeutics Stock Quote, Chart, News, Analysts, Financials TSX:GUD).

On March 21, GUD reported its Q4 and fiscal 2023 results. In the fourth quarter, the company lost $7.9-million on revenue of $74.2-million.

“I am excited to announce that we have delivered 10 consecutive years of record revenues and have delivered record EBITDA since 2019,” CEO Samira Sakhia said. “For 2023, we reported revenues of over $343-million, a growth of 18 per cent, and adjusted EBITDA of over $60-million, a growth of 11 per cent. While delivering on record results, we made significant progress in advancing and expanding our product pipeline. We submitted five products, Minjuvi, Pemazyre, Tavalisse, Rembre and Karfib, for regulatory approval across multiple territories and received the regulatory approval of Minjuvi in Brazil, Palbocil and Xetrane in Chile, and Karfib in Colombia. In addition, we are launching four products, Imvexxy and Bijuva in Canada, Minjuvi in Brazil, and Palbocil in Argentina. Further to advancing our product pipeline, we expanded our portfolio with the in-licensing of three additional products, a branded generic molecule in oncology/hematology for Brazil, Qelbree for Canada, and IPX203 for Canada and Latin America.Looking ahead we will remain focused on our strategy of building a profitable pan-American (ex U.S.) company commercializing both innovative and branded generic pharmaceuticals products. With our strong foundation and unique platform, we are poised to be the partner of choice for Canada and Latin America.”

Sarugaser says this was a modest beat on the revenue side, while Adjusted EBITDA and Net Income fell below expectations.

“While seq. growth through FY23 has been lumpy, 4Q23 was a steady-as-it-goes quarter, representing 8.5% y/y growth, and driving FY23/FY22 Rev. growth of 12%. We recognize $88.4 mln Rev. (at constant currency) as 4Q’s Rev. number, untangling it from the IFRS-reported number of $74.2 mln, which, specifically, has been adjusted for Argentinian hyperinflation (a non-cash adjustment). EBITDA of $12.0 mln was a small miss from RJLe/consensus, contributing $60.1 mln for FY23,” the analyst wrote. FY23 was operationally productive, with ten regulatory submissions, approvals and product launches (see below, Ex. 1.). In particular, we note the regulatory approval of Minjuvi (tafasitamab; for the treatment of adult patients with relapsed or refractory diffuse large B-cell lymphoma (DLBCL) who are not eligible for autologous stem cell transplantation) in Brazil, which we expect to contribute ~$20 mln to GUD’s pipeline peak sales estimate (see our Mar 6 note). Minjuvi has also been submitted for marketing authorization in Mexico and Argentina, GUD received the regulatory approval for Minjuvi in Brazil which was launched commercially in 2024. Through FY23 GUD also continued to deliver on its windfall AmBisome order from the Ministry of Health of Brazil, yielding $25 mln in Rev. In Dec. 2023, GUD signed a new MOH contract for the drug, which should drive a total of $18.9 mln in sales during FY24 ($2.4 mln of which had already been delivered during 1Q24).”

In a research update to clients March 21, Sarugaser maintained his “Outperform 2” rating and $7.50 price target on GUD.

The analyst thinks GUD will post EBITDA of $64.0-million on revenue of $354.0-million in fiscal 2024.