Liminal BioSciences Inc. PFSCF

Canaccord: Buy rating and $3.25 target price for ProMetic

[shakerman640]

According to Canaccord Genuity:

https://personal.crocodoc.com/a19liQg

ProMetic Life Sciences Inc.

RATING: BUY (unchanged)

PRICE TARGET: C$3.25↑ from C$3.00

Raising Target Price

Identifying yet another opportunity: ProMetic adds C1-INH to its pipeline

Investment Recommendation

ProMetic has announced the next plasma-derived drug to be moved into clinical development as C1-esterase inhibitor, or C1-INH. This drug is used for the treatment of a rare disease called hereditary angioedema (HAE), which results in spontaneous and potentially dangerous localized swelling. We believe that this drug addresses a multi-billion dollar overall global market, and therefore even modest penetration represents a significant opportunity for ProMetic.

The addition of new products to the company’s development pipeline represents one of two near-term valuation levers (the other being additional manufacturing capacity), in our view. With steady news flow over the next few months leading into the major potential catalyst in Q3 with the plasminogen Phase III results, we believe that recent weakness in the stock presents a buying opportunity.

Investment Highlights

• Renewable pipeline of products. ProMetic’s PPPS technology is an extremely powerful platform when applied to plasma-derived therapeutics, presenting a renewable pipeline of products that can be extracted from human blood plasma with modest variable costs. We believe that the expected announcement of additional new drugs should provide incremental upside to our valuation.

• New manufacturing capacity adds cash flow. We believe that, at its core, ProMetic is a manufacturing story. Peak revenue for many of ProMetic’s plasma-derived therapeutics are constrained by manufacturing capacity; therefore, the addition of new capacity presents significant upside to our forecasts.

• 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. 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 ProMetic based on a sum-of-the-parts. We value the resin business using a DCF analysis (9.4% WACC and 2.0% terminal growth), plasma-derived therapeutics with an explicit NPV, and the small molecule pipeline with a pNPV. Following the announcement of a new drug in its development pipeline, we have included this in our model for ProMetic, which adds an incremental $0.31 per share to our valuation. We are therefore increasing our target price to C$3.25 (from C$3.00). This target implies a 37.1% return and continues to support our BUY recommendation.