Liminal BioSciences Inc. LMNL

RE:Cannacord research report

[Felco]

Only part of the report, but covers the essentials.

Company Update

Incremental positive: PBI-4050 receives Orphan Drug designation

Investment Recommendation

Incremental positive. Shares of ProMetic spiked +13.6% on Friday following an FDA website posting that PBI-4050 had received Orphan Drug designation (ODD) in idiopathic pulmonary fibrosis (IPF); the stock was trading 7.9% higher on the day before being halted to allow full dissemination of this news. Orphan Drug designation provides products that treat rare diseases with up to seven years of exclusivity in the US and, while this is certainly a positive development, we do not view it as a major catalyst as 4050 will still need to go through the regular FDA approval process.

Nonetheless, given management’s goal of having four to five plasma-derived drugs in late-stage development by the middle of the year, we believe ProMetic remains one of the best opportunities in our Canadian healthcare research universe.

Investment Highlights

• A possible glimpse at 4050's efficacy in 2015. We believe that PBI-4050 presents biotech-like optionality for investors. As ProMetic expands the possible indications into IPF and metabolic syndrome, we believe that we may get a glimpse into the efficacy of this drug in coming months.

• Deals for other fibrotic disease drugs highlight 4050’s value. While clinical development for this drug is very risky, we believe PBI-4050 has blockbuster potential (evidenced by Roche’s acquisition of Intermune last summer for $8.3 billion).

• Impressive data indicative of PBI-4050’s potential. Although we generally do not lend a lot of credence to preclinical studies, recent data on PBI-4050 did show a dramatic impact on survival.

• Advancing the late-stage pipeline. ProMetic expects to have several plasma-derived therapies in the clinic by the middle of the year, including orphan drug plasminogen and IVIG. We believe that these are lower-risk, abbreviated clinical trials, with data read-outs expected to begin in the second half of 2015. These drugs represent major growth drivers for the company, with an ever-expanding pipeline generated from ProMetic's proprietary PPPS manufacturing technology.

  Valuation

  We value PLI based on a sum-of-the-parts. We value the resin business using a DCF analysis (9.2% WACC and 2.0% terminal growth), plasma-derived therapeutics with an explicit NPV, and the small molecule pipeline with a pNPV. Following this update, we have made no changes to our model and maintain our C$3.00 target price. This target implies a 45.6% return and continues to support our BUY rating.