Knight Therapeutics Inc. (GUD:TSX; KHTRF:OTCMKTS) beat topline and bottom Q3/22 estimates and then raised its 2022 revenue guidance, reported Research Capital Corp. analyst Dr. Andre Uddin, in a November 10, 2022 research note.
Revenue Exceeds Forecasts
Uddin summarized Knight's Q3/22 financials. The Quebec-headquartered firm's Q3/22 revenue was US$72.3 million ($72M), above Research Capital's US$62.2M estimate and the Street's forecast of US$64.3M, the analyst noted. Revenue a year ago was US$73.3M.
The biopharma's Latin American business arm GBT outperformed in Q3/22, generating US$67.5M in sales. This was more than Research Capital's expectation of US$55M but just below Q3/21 sales of US$67.7M.
Given Knight has "a healthy balance sheet relative to most Canadian specialty pharmas," Uddin described the company as "a defensive play, a hedge in this market volatility and rising rate environment."
Knight's Canadian and other businesses collectively fared worse than expected, relayed Uddin. Their sales amounted to US$4.8M, much less than Research Capital's US$7.2M estimate and last year's sales of US$5.6M.
On the heels of Knight's Q3/22 performance, management increased revenue guidance for all of 2022 by US$5 on both ends, to US$265–275M, Uddin indicated.
Research Capital followed suit and raised its 2022 revenue estimate for the biopharma to just higher than the middle of its new guidance.
Strong Cash Position
Knight has been operating cash flow positive and ended Q3/22 with US$145.1M in cash and US$33.2M in debt, Uddin pointed out.
"The company has a solid cash position and an ongoing share buyback program," Uddin wrote. "We believe Knight's decent cash levels should enable the company to continue [to] seek accretive business development opportunities."
Given Knight has "a healthy balance sheet relative to most Canadian specialty pharmas," Uddin described the company as "a defensive play, a hedge in this market volatility and rising rate environment."
Other Numbers Look Good
Also noteworthy, Uddin relayed, is that Knight's Q3/22 key margin metrics were also better than Research Capital and consensus projections.
Specifically, adjusted EBITDA was US$9M, ahead of Research Capital's US$7 estimate. In Q3/21, adjusted EBITDA was US$17.3M.
Net income was -US$1.6M versus Research Capital's forecast of -US$10.9M. In Q3/21, net income was -US8.6M.
Knight's Q3/22 gross margins of 49% matched Research Capital's projection. Q3/21 gross margins were 54%.
Model Revised
Uddin noted that Research Capital removed Paladin Labs' historical price:book value from its model on Knight. This resulted in a lower target price of CA$7.55 per share, down from CA$7.80. The current share price of the biopharma, trading primarily sideways recently, is about CA$5.24. Research Capital still rates it Buy.
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Disclosures For Research Capital Corp., Knight Therapeutics Inc., November 10, 2022
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