Cipher Pharmaceuticals upgraded to “Buy” at Leede Financial

Following the company’s fourth quarter results, Leede Financial analyst Douglas Loe has upgraded Cipher Pharmaceuticals (Cipher Pharmaceuticals Stock Quote, Chart, News, Analysts, Financials TSX:CPH).

ON March 18, CPH reported its Q4 and fiscal 2024 results. In the fourth quarter, the company posted Adjusted EBITDA of $5.0-million on revenue of $11.8-million, a topline that wasup 141%, year-over-year.

“In 2024, Cipher entered a new phase of substantial growth with its acquisition of the Natroba business from ParaPRO LLC, providing us with a U.S.-based commercial footprint, including a commercial sales team and the Natroba™ product for the treatment of head lice and scabies, which form the perfect platform to support further growth in the U.S. and to launch unique dermatology and infectious disease products complementary to Natroba,” interim CEO Craig Mull said.

Loe says this was a good result for the company.

“We are generally positive about FQ424 financial data and the sequential EBITDA growth trajectory exhibited in the period, at least once credible adjustments are infused into our EBITDA calculation,” he wrote. “Operating cash flow was correspondingly strong, though for different reasons and we are optimistic that pure operations supplemented by mitigation of tax expense can lift pure operating cash flow to record levels just on Natroba-Absorica-Epuris baseline economics alone. But beyond that, we see upside to our forecasts on consummating future product-in-licensing transactions (hopefully in the Canadian/US dermatology space) to exploit marketing infrastructure already in place in those geographies. Pace of product inlicensing deal consummation is more of an expectation than a tangible forecast, but conversely, our model does make overt assumptions on pace of Natroba growth in US and RoW markets and we believe that Natroba revenue ramp (and the EBITDA/cash flow growth that it facilitates) can be a key value driver in our CPH investment thesis.

In a research update to clients March 19, Loe upgraded CPH from “Hold” to “Buy” while maintaining his price target of $14.50 on the stock, implying a return of 21% at the time of publication.

The analyst thinks the company will post EBITDA of (All Figures USD) $24.9-million on revenue of $49.9-million in fiscal 2025. He expects EBITDA of $27.2-million on a topline of $54.3-million in fiscal 2026.

“We are maintaining our PT of $14.50 while upwardly revising our rating on CPH to a Buy from Hold, solely as a valuation call and without any meaningful shift in our valuation metrics (still based on our F2026 EBITDA/fd EPS forecasts, or the specific forecasts that feed into our valuation methodologies,” Loe concluded. “We project F2026 EBITDA/fd EPS of US$27.1M & US$0.70/shr respectively, while incorporating FQ424 balance sheet data (cash of US$17.8M, total debt of US$40M) and fd S/O of 26.6M into our EV calculation. As shown in Exhibit 4, the multiples we incorporate into our CPH valuation are highly similar to those ascribed to Cipher’s specialty pharmaceutical peers and to consensus F2026 EBITDA/EPS forecasts published for each firm. After converting our PT to CDN, we derive a one-year PT of US$10.13/C$14.48, which we round as before to C$14.50. At current levels, our PT corresponds to a one-year return of 21%. At current price levels, CPH is up 915% since we initiated coverage under the Leede Financial banner in early Jan/21.”