Canaccord Initiates coverage with $2 target Tremendous growth potential with a diversified risk profile: Initiating coverage with a BUY rating and C$2.00 target Investment recommendation We are initiating coverage of ProMetic Life Sciences with a BUY recommendation and a C$2.00 target price. ProMetic is a global biopharmaceutical company that focuses on the manufacturing and development of drugs derived from human blood plasma. The company's core purification technology provides for the efficient extraction of any protein from biological fluids, with yields that are far superior to the industry average. The company now hopes to leverage its new manufacturing capacity to develop and commercialize plasma-derived protein drugs, thereby capturing greater value from its technology. Finally, ProMetic has a pipeline of small molecule drugs that can present significant upside for investors with a longer-term horizon. Investment highlights Diversified risk profile -- We believe that ProMetic presents three businesses with different growth opportunities and distinct risk profiles. While the resins segment represents a validated and lower-risk operating model generating steady cash flows, we believe that plasma-derived therapies presents a higher-risk opportunity with significant upside potential. Moreover, we believe that small molecule drug portfolio presents biotech-like optionality on several potential blockbuster therapies. Hematech facility should signal the start of high growth -- We believe that the approval of ProMetic's first plasma-derived drug in 2015 will drive top-line CAGR of 22.8% over the following two years, higher than the overall therapeutics market, which is expected to grow at 8.3% annually. We believe that ProMetic's growth is constrained by manufacturing capacity, and therefore project that top-line growth will accelerate to almost 200% in 2017 as the Hematech facility comes online. Catalyst-rich plasma-derived therapy pipeline is a key value driver -- Plasma-derived therapeutics are a key driver of value for investors, providing tremendous upside, relatively low-risk, short development timelines, and a renewable pipeline of products. However, we do not expect that these products will be a significant contributor to profitability until 2016. Nonetheless, we believe that this business will provide several major catalysts for the stock over the next 18 months. Valuation We value ProMetic based on a sum-of-the-parts analysis. To capture the diverse risk of the company's three businesses, we have elected to use separate valuation methodologies. We value the steady resin business based on a DCF analysis, using a WACC of 10.0% and 2.0% terminal growth rate, which yields a value of $0.44 per share. Plasma-derived therapeutics is valued at $1.44 per share using an explicit NPV, and ProMetic's small molecule development is valued at $0.11 per share using a probability-weighted NPV. Together, we arrive at a target price of C$2.00 per share, which implies a 34.2% return and supports our BUY rating.