Raymond James analyst David Novak is slightly clipping his estimate of Knight Therapeutics (Knight Therapeutics Stock Quote, Charts, News, Analysts, Financials TSX:GUD), reducing his target price from $8.50/share to $7.50/share despite maintaining an “Outperform 2” rating in an update to clients on Thursday. Montreal-based Knight Therapeutics is a specialty pharmaceutical company that develops, acquires, in-licenses, out-licenses, markets and distributes pharmaceutical and consumer health products and medical devices in Canada, Latin America and internationally. Novak’s analysis came after Knight released its fourth quarter financial results, which the analyst noted to be lighter than expected. The company’s quarterly report was headlined by revenue of $58.3 million for a six per cent year-over-year increase, though it was still a miss in relation to the $62.4 million consensus projection, as well as the $67.9 million expectation set by Raymond James. Meanwhile, despite being a 222 per cent year-over-year increase, the $5.7 million Knight Therapeutics reported in adjusted EBITDA was a significant miss when compared to the $11 million consensus projection, as well as the $13.7 million Raymond James forecast. The net loss was also greater than expected at $8.3 million compared to the $2.5 million loss Novak forecasted. Novak attributed the company’s misses to approximately $3-4 million in inventory purchases of Knight’s infectious disease products within the prior quarter which was not used in that same quarter. "During the year, we made significant strides towards completing the integration of the Grupo Biotoscana acquisition, all while strengthening the team and processes and driving strong performance,” said Samira Sakhia, President and Chief Executive Officer of Knight Therapeutics in the company’s March 24 press release. “It is thanks to the hard work of our employees that we achieved unprecedented results in 2021 and we are entering 2022 with a stronger platform that is well equipped to continue delivering on further growth and success." The results locked Knight’s revenue in at $243 million for 2021, marking a 21.5 per cent year-over-year increase. Looking ahead to 2022, Novak has lowered his projection from $289 million to $262 million, which represents an approximate midpoint from updated management guidance of between $260 million and $265 million, which would be a potential year-over-year increase of 7.8 per cent. In terms of valuation, Novak forecasts the company’s EV/Revenue multiple to continue dropping after lowering his multiples to 2.5x in 2020 (previously 2.8x) and 2x in 2021 (previously 2.1x), maintaining a 1.9x projection for 2022. Despite the quarterly misses, Knight Therapeutics exited the quarter with $149.5 million in cash and equivalents available. In Novak’s view, the company brings about added confidence on account of believing its shares are undervalued based on operational fundamentals with the company having purchased 12.3 million shares for total aggregate of $64.4 million, boosted by a purchase of 930,000 additional shares for approximately $5 million before the end of the year. Meanwhile, Novak has also modified his BVPS projections, increasing the 2020 value from $6.88/share to $7.22/share, though he lowered his 2021 value from $7.04/share to $6.86/share, and also lowered his 2022 projection from $7.38/share to $7.10/share. The company’s EPS for 2021 came in at $0.13/share, down from Novak’s original estimate of $0.25/share. However, Novak now projects a loss of $0.33/share in 2022 compared to his initial estimate of a $0.09/share positive, eliminating a 2022 P/E multiple from Novak’s projections. “Knight’s current free cash flow profile, well capitalized balance sheet and future growth profile positions the company well in a raising inflationary environment, where many healthcare equities continue to be impacted by the devaluation of future cash flows,” Novak said. “Considering the ongoing valuation deflation plaguing the broader healthcare/biotech sector, as evidenced by the XBI which is now tracking -30.7 per cent on a TTM basis versus the S&P 500 tracking +15.6 per cent over the same time frame, we continue to view Knight as one of the best defensive names to own in the Canadian healthcare sector,” Novak said. The subsequent drop from the quarterly results release has put Knight into a loss of 4.4 per cent over the last 12 months and a loss of 2.2 per cent since the start of 2022. Prior to the last two weeks, the stock had been steadily climbing since hitting a 52-week low of $4.99/share on March 24, getting up to a 52-week high of $5.65/share on May 18, most recently matching that peak on March 18. At the time of publication, Novak's $7.50 target represented a projected 12-month return of 42.9 per cent.