RE:Analyst's ReportsHi Savvy,
Raymond James put out their report today with a price target of $8.50. I will apologize in advance because I am at Stockhouse Luddite and don't really know how to past it in here with the tables!
2Q21 Results Outperform Expectation Outperform 2
Target Price C$8.50
RECOMMENDATION
On Friday, Knight Therapeutics announced 2Q21 financial results coming in ahead of both our
and consensus estimates. Relative strength in the quarter was driven by increased demand
of Knight's infectious disease products, including Cresemba and AmBisome, in addition to
initiation contribution from the new Exelon revenue stream. While go-forward operating results
are expected to remain lumpy in the near term, relative strength in the quarter continues to
support our Outperform recommendation, $8.50 per share target.
Analysis
2Q21 Financial Results: For the quarter, Knight reported revenues of $65.8 mln (+23.6% y/y or
+28% on a constant currency basis), beating our estimate of $53.9 mln and consensus of $50.3
mln. Adjusted EBITDA was reported at $9.4 mln (+22.8% y/y or +47% on a constant currency
basis), above our estimate of $4.3 mln and consensus of $4.1 mln. Finally, net income to GUD
shareholders was reported at $29.0 mln, above our Net Loss estimate of $16.3 mln and the
consensus Net Loss estimate of $2.0 mln. The variance between reported net income and our
estimate was largely attributable to a net gain on financial instruments of $28.5 mln, in addition to relative strength on the top line attributed to Knight's infectious disease portfolio. Under its NCIB, Knight purchased 1.3 mln common shares during the quarter at an aggregate cost of $7.0 mln, and an additional 2.7 mln shares after quarter-end at an aggregate cost of $13.9 mln. Knight is exiting the quarter with a balance of $166.1 mln in cash, cash equivalents and marketable securities.
Product and Corporate Updates:
Notably, Knight highlighted 1) The previously announced transition of Jonathan Goodman to Executive Chairman, and Samira Sakhia to CEO, effective September 1, 2021, 2) A 5-week revenue contribution from the recently in-licensed asset, Exelon, of $4.2 mln, 3) The potential to assume additional LatAM debt in order to hedge against local currency changes.
Valuation
Following the quarter, we have amended our FY21E and FY22E estimates and updated our model to reflect Knight's updated net cash position and share count. The net result of our changes has no material impact on our per-share valuation. Our $8.50 per share target price is based on a discounted-cash-flows-based valuation methodology, utilizing a weighted-average cost of capital of 10.0% (in-line with the broader industry) and a terminal growth rate of 2.5% (in-line with long-term GDP growth). See Exhibits 2 and 3.
Best of luck,
LR