Liminal BioSciences Inc. PFSCF

RBC: Outperform rating and $3.50 target price for PLI

[stockguru1982]

According to RBC Capital Markets:

https://is.gd/MxV9fO

August 14, 2015

ProMetic Life Sciences Inc.

Rating: Outperform

Speculative Risk

TSX: PLI; CAD 2.11

Price Target: CAD $3.50

Q2/15 results: in-line results, H2 2015 guidance of $20MM revenues

Our view: Q2/15 revenues of $2.9MM vs. our estimate of $2.7MM. Management is guiding to $20MM in revenues in H2 2015 and we have updated our forecasts to ~$17MM in H2 2015 revenues. We are monitoring clinical updates more than revenue guidance and believe PLI is making significant clinical progress that will be validated in H2 2015 and H1 2016.

Key points:

Revenues of $2.9MM vs. our estimate of $2.7MM. PLI reported revenue of $2.9MM vs. our $2.7MM estimate. We were the only number in consensus, so we have excluded consensus numbers for revenue. Revenues were down from $4.4MM in Q2/14. Management is guiding to $20MM in revenues during H2 2015 and we currently expect ~$17MM in revenue in H2 2015.

EPS loss of $0.02 vs. loss of $0.02 consensus. EPS for the quarter were ($0.02) vs. ($0.02) consensus (Thomson ONE, 2 analysts) and our estimate of ($0.02). Last year, EPS was $0.04.

Emergent Biosolutions deal closed, PBI-4050 clinical update. On Thursday (Aug 13th), PLI announced the closing of the acquisition of the Emergent Biosolutions transaction, which has a capacity of 250,000L (existing ProMetic facility in Laval, QC, has 150,000L capacity, Generium will have 600,000L). Management expects preliminary biomarker data from their T2D and metabolic syndrome PBI-4050 trial to readout in Q4/15, at which point we anticipate management will focus on specific subsets of patients with metabolic syndrome. We have provided more detail on clinical updates and manufacturing updates in the note.

Model revisions: We have updated our revenue forecasts for H2 2015 to reflect management guidance but remain conservative and have increased H2 2015 revenues by ~$1MM to ~$17MM.

Price target unchanged at C$3.50.

Target/Upside/Downside Scenarios

Target price/base case

Our base case target is $3.50 and values the bioseparation and plasma-derived proteins business at $2.85/sh. Our base case value for the PBI-4050 opportunity equates to $0.75/sh for total ProMetic valuation of $3.60/sh and a price target of $3.50/sh. This scenario assumes PBI-4050 is approved for IPF and penetration levels of 5% for IVIG and 7.5% for A1AT by 2025.

Upside scenario

Our upside scenario is $6.00 and values the bioseparation and plasma-derived proteins business at $4.50/sh. Our upside case value for the PBI-4050 opportunity equates to $1.50/sh. This scenario assumes that PBI-4050 is approved for two or more lung indications and that penetration levels by 2025 for IVIG and A1AT are improved as production capacity increases.

Downside scenario

Our downside scenario is $1.50 and values the bioseparation and plasma-derived proteins businesses at $1.50/sh. Our downside case value for the PBI-4050 opportunity equates to $0.00/sh. This scenario assumes that PBI-4050 fails and that penetration levels for IVIG and A1AT are reduced by 2025 due to clinical and manufacturing delays.