Medexus is still a buy, Ventum says

A new development has been a drag on its share price, but Ventum Capital Markets analyst Stefan Quenneville is sticking to his guns on Medexus Pharmaceuticals (Medexus Pharmaceuticals Stock Quote, Chart, News, Analysts, Financials TSX:MDP).

On September 16, MDP announced that the FDA had extended the review period for the new drug application for treosulfan by three months.

“We recognize that this development further extends the regulatory review process timeline,” CEO Ken d’Entremont said. “Nevertheless, we are encouraged to see that the FDA remains actively engaged with medac, and we continue to prepare for an approval of treosulfan in the United States and a commercial launch in the first half of calendar year 2025.”

The analyst says this might be an overreaction, but adds that it can’t be regarded as a positive.

“Medexus announced today that the FDA has extended by three months its review of the New Drug Application (NDA) resubmission for treosulfan. While the stock has reacted negatively to the news given the challenging history of the drug with the FDA, we highlight that these types of review delays are relatively common at the agency and are more likely due to challenges in managing additional data submissions and complex labeling discussions, and do not necessarily indicate much about the approvability of the submission,” he wrote. “Nevertheless, the delay does push back our anticipated approval of treo by three months (Q4/24 to Q1/25), however, it does not change our overall view on its likely approval (75% probability of success) given the drug’s demonstrated survival benefit and its prior approvals in Canada and Europe.”

In a research update to clients September 16, Quenneville maintained his “Buy” rating and price target of $3.30 on Medexus.

The analyst thinks the company will post Adjusted EBITDA of $19.5-million on revenue of $113.1-million in fiscal 2024. He expects those numbers will be $23.0-million on a topline of $106.9-million in fiscal 2025.

“While we have shifted our treo launch timeline by a quarter, we have not changed our overall view of the peak revenue forecasts for treo or our 75% probability of approval for the drug,” Quenneville concluded. “As such we are maintaining our BUY rating and C$3.30 target price, which is derived using the average of our DCF (13% discount rate, 3% terminal growth) and 7.5x 2024 EV/EBITDA. MDP currently trades at 4.4x 2024 EV/EBITDA, a significant discount to Specialty Pharma peers at 9.2x, despite the meaningful upside optionality from a potential FDA approval for treosulfan.”