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Medexus Pharmaceuticals shares climb as Canaccord Genuity upgrades rating to Buy from Hold following fiscal 3Q results

Published: 12:25 03 Mar 2021 EST

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"We believe there is value here ahead of treosulfan's August 2021 PDUFA [prescription drug user fee amendments] date", Canaccord's analysts concluded

Medexus Pharmaceuticals Inc (CVE:MDP) shares rose for the second day in a row on Wednesday after the company’s fiscal 3Q results were enough for analysts at Canaccord Genuity Capital Markets to upgrade the firm’s rating to Buy from Hold, albeit on valuation grounds, maintaining its price target at C$9.50. 

Medexus shares were up more than 4% to C$7.48 around midday.

READ: Medexus Pharmaceuticals doubles fiscal 3Q revenue to record C$31.5M

In a note to clients, Canaccord's analysts wrote: “Yesterday evening, MDP reported a relatively in-line set of results for the quarter ended December 31, 2020. Revenue of C$31.5 million modestly missed our C$32.9 million estimate but was in line with the consensus of C$31.6 million. Gross profit of C$16.4 million was in line with our $16.5 million forecast, equating to a gross profit margin of 52%. Adjusted EBITDA of C$5.1 million came in just ahead of our C$4.9 million forecast and above the Street’s C$4.4 million.”

They pointed out that the company’s net loss of C$17.1 million significantly missed Canaccord’s C$200,000 loss estimate but noted that the reason for the underperformance was a C$16.5 million swing in the fair value of convertible debentures, which occurred because Medexus’ stock price was up sharply last quarter.

The analysts noted that, in February, Medexus in-licensed Treosulfan, a conditioning agent for hematopoietic stem cell transplantation with Orphan Drug Designation, from Medac Pharma. 

“[Treosulfan is] a drug we estimate could hit US$242 million in peak sales,” the analysts said. “Despite the work that comes with launching a drug such as this, for instance building out a brand new sales team, MDP continues to deepen its pipeline of high-quality in-licensing opportunities. It is prioritizing those that provide the best potential to leverage the existing North American commercial infrastructure.”

The Canaccord analysts added: “We have made no changes to our forecast and continue to value MDP at 9.0x our C2021 adjusted EBITDA estimate of C$28.4 million. This has no impact on our C$9.50/sh price target. However, given the recent dip in the share price (now 35% upside to our target), we are moving to a Buy rating (from Hold)."

"We believe there is value here ahead of treosulfan's August 2021 PDUFA [prescription drug user fee amendments] date", they concluded

Contact Andrew Kessel at andrew.kessel@proactiveinvestors.com

Follow him on Twitter @andrew_kessel

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on 2/3/21