Globe and MailMay 25, 2017
Thursday’s TSX breakouts: A stock with 8 buy calls offering upside potential and downside protection
Featured today is a stock that is in a holding pattern as investors await news of acquisitions or strategic partnerships. Right now, it has traded down to the lower end of its trading band and is three cents away from appearing on the negative breakouts list. However, the downside risk may be contained given that the company has a significant amount of cash on its balance sheet. Patient investors may be rewarded. The security I am referred to is Knight Therapeutics Inc. (GUD-T).
A brief outline is provided below that may serve as a springboard for further fundamental research.
The company
Montreal-based Knight Therapeutics is a pharmaceutical company founded in 2014 by Jonathan Goodman, the previous chief executive and co-founder of Paladin Labs, which was acquired by Endo Health Solutions. Prior to being acquired, Paladin’s stock price enjoyed a stellar rally owing to its solid fundamentals. The company reported 19 consecutive years of record revenues and the share price climbed from $1.50 to $142 a share.
As Knight’s chief executive officer, Mr. Goodman’s core objective is to replicate his successful strategy at Paladin of acquiring or working in partnership with other pharmaceutical companies (also known as in-licensing) in order to develop and market new products. Knight has a solid balance sheet to support its growth by acquisition strategy with over $763-million in cash and cash equivalents at the end of the first quarter, or over $5 per share of cash.
In the earnings release, Mr. Goodman reiterated management’s goal stating, “Looking ahead, we are focused on advancing our product pipeline and capitalizing on opportunities to add new products to our portfolio.”
Insider ownership is significant, aligning their interests with shareholders. Mr. Goodman and board member Merir Jakobsohn have a combined ownership position of over 20 per cent of the shares outstanding.