Knight Therapeutics Inc T.GUD

Interesting Stats

[EbbFlow88]

I pulled some data from the past number of annual reports. The book value has been dropping each year which is obviously not a good thing. However, the shares outstanding have been decreasing more, resulting in an increasing BV per share. This cannot continue in perpetuity, and so a turn to profitability will need to happen in the next couple of years. YTD we are positive EBIT for the first time since GBT. Let's see if this is the beginning of the real turn around.

What I do find interesting in terms of sentiment is that prior to the GBT announcement you can look at the premium the share price had to book value which was a positive 7-15%. Today that is sitting at -42%. Goes to show you how the management premium for Goodman et al. has been totally wiped out and now priced in as a negative. 

If they can clean up GBT and begin to show that the company is in fact a profitable drug company after covering for D&A that will be a powerful reversal to todays large discount to BV. 

	2018	2019	2020	2021	2022	YTD-23
Book Value	1,030,032,000	915,106,000	886,241,000	842,018,000	825,857,000	807,199,000
BV/Share	7.21	6.55	6.73	6.76	7.19	7.59
Shares Outstanding	142,827,616	139,758,522	131,738,255	124,480,259	114,890,252	106,400,000

Market Cap	1,098,344,367	1,059,369,597	704,799,664	659,745,373	595,131,505	469,224,000
Historical Price	7.69	7.58	5.35	5.3	5.18	4.41
Discount/Premium to BV	0.48	1.03	-1.38	-1.46	-2.01	-3.18

[curiousj]

OCF is the most important metric for GUD. D&A is almost entirely from GBT, and so very will little goodwill. you're expensing a large part of the terminal value paid for GBT, so you save taxes and is very conservative assuming you can grow organically what they have

[EbbFlow88]

So you're saying that the D&A is coming from hard assets from GBT? What about the drug deals that are being depreciated over their "useful" life and that will have to be replenished with new drugs? I know you are right to a certain degree, but how much of that D&A is a real cost to GUD? The drug deals do have a useful life and/or an end to the agreement that may not be

[EbbFlow88]

An example in 2022 annual report: On the Income Statement, it reads "Amortization of Intangible Assets" = $51.7M Under Operating Cash Flow, it reads "Depcreciation & Amortization" = $62.6M So, the majority is intangible assets which I understand as our drug rights. Only 11M is for GBT/hard assets. Goodwill is not amortized.  If the drugs are accurately amortized

[curiousj]

a major part of COGS would be related to royalties, so upfront investments for new drug intangible to replace legacy ones would be minor relative to the royalties of 15-20%+. and also remember many GUD drugs are small niche products, so can far outlive their patent life especially when grossing $5-20mn per drug.  I agree that FCF is better indicator, but its too hard to gauge what would be