In an Aug. 16 research note, Paradigm Capital Inc. Analyst Scott McAuley, Ph.D. provided an update on recent activities and financial results at global specialty pharmaceutical company Knight Therapeutics Inc. (GUD:TSX; KHTRF:OTCMKTS).
McAuley noted that Knight Therapeutics was able to greatly expand its product line after acquiring Grupo Biotoscana (GBT). According to McAuley, the GBT purchase allowed the firm to significantly grow its Pan-American (ex-U.S.) business as it now sells more than 100 products in 11 countries.
The report from Paradigm mentioned that with $166.1 million in cash and marketable securities held on its balance sheet, Knight has plenty of ability to pursue licensing agreements for additional new products and other M&A opportunities.
McAuley advised that Knight released its Q2/21 financial results and indicated that the results exceeded Paradigm's estimates and consensus on both top-line revenue and EBITDA.
Knight reported that Q2/21 revenue increased 24% year-over-year to $65.8 million, which exceeded the consensus estimates of $55.3 million and Paradigm's expectations for $56.4 million.
Knight posted adjusted EBITDA of $9.4 million in Q2/21, compared to $7.4 million in Q2/20. The adjusted EBITA results in the latest quarter greatly beat both the consensus estimates of $3.6 million and Paradigm's forecast for $4.9 million.
The report noted that effective September 1, 2021, Knight's President and COO Samira Sakhia has been appointed to lead the company as president & CEO, and the firm's founder Mr. Goodman will assume the duties of executive chairman.
The analyst pointed out that even though Knight's shares have been trading at a low share price, the company is continuing with its share purchases. During Q2/21 and thereafter, the firm purchased 4.0 million of its own shares, including 1.3 million shares for $7.0 million in Q2/21 and a subsequent 2.7 million shares for an additional $13.9 million.
Knight is not stopping there and in July 2021, it launched a new Normal-Course Issuer Bid (NCIB) to purchase up to 10.3 million common shares, or roughly 10% of the average float, over the next 12 months.
Paradigm Capital advised that insiders at the company are also buying shares in the company in the open market and increasing their share positions and stated the Mr. Goodman has purchased more than 96,000 shares for greater than $850,000 through 2021.
The report listed that the company is reaping the benefits of its Exelon acquisition that just closed in late May 2021. The newly acquired Exelon products for treating Alzheimer's symptoms have already contributed $4.2 million in gross profit in Q2/21. In addition, Knight was able to grow revenues from its recently launched products by $4.8 million in the latest quarter.
Paradigm Capital Inc. advised that it is reiterating its "Buy" rating for Knight Therapeutics Inc. and is raising its 12-month price target from CA$7.50/share to CA$7.75/share. The company's shares trade on the Toronto Stock Exchange under the symbol GUD and is currently trading at CA$5.47/share on August 18, 2021.
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Disclosures from Paradigm Capital, Knight Therapeutics Inc., Research Note, August 16, 2021
The analyst (and associate) certify that the views expressed in this report accurately reflect their personal views about the subject securities or issuers. No part of their compensation was, is, or will be, directly or indirectly, related to the specific recommendations expressed in this research report.
Analysts are compensated through a combined base salary and bonus payout system. The bonus payout is determined by revenues generated directly or indirectly from various departments including Investment Banking, based on a system that includes the following criteria: reports generated, timeliness, performance of recommendations, knowledge of industry, quality of research and investment guidance and client feedback. Analysts are not directly compensated for specific Investment Banking transactions.
Knight Therapeutics Inc.:
Paradigm Capital Inc. expects to receive or intends to seek compensation for investment banking services from the subject companies in the next 3 months.
