Knight Therapeutics Inc

Knight Therapeutics Inc (TSX: GUD) is a specialty and generic drug manufacturing company. Its principal business activity is focused on developing, acquiring, in-licensing, out-licensing, marketing, and distributing innovative pharmaceutical products, consumer health products, and medical devices in Canada and select international markets.

• Received approval for NERLYNX® from Health Canada: NERLYNX® in combination with capecitabine was recently authorized by Health Canada for the treatment of adult patients with metastatic HER2-overexpressed/amplified breast cancer. The decision was made based on the findings of a worldwide Phase III NALA study. Under the terms of a licensing agreement with Puma Biotechnology, Inc., Knight has the exclusive right to commercialize NERLYNX® in Canada.
  

• Acquired regional rights of Exelon: The corporation recently paid USD 180 million to Novartis for the exclusive rights to produce, market, and distribute “Exelon”, a drug used for treatment of Alzheimer and Parkinson disease both in solution and capsule form across Canada and Latin America. Exelon had annual sales of around USD 47 million for Canada and Latin America in 2020, so the firm is pleased to add it to its portfolio of niche Central Nervous System (CNS) products.
  

• Developing branded generic products: Through the GBT acquisition, the Company is concentrating on developing branded generics for Argentina and other LATAM markets. The Company is focusing on expanding the geographic reach of currently developed branded generics. Besides, it is working on optimizing development efforts and capabilities to access more enormous opportunities for LATAM.

• Reduced debt burden:The company was able to reduce its debt load, which is commendable. Bank loans amounted to CAD 38.1 million on March 31, 2021, down CAD 13.5 million from the previous period, owing to CAD 8.8 million in loan repayments and a further CAD 4.8 million due to foreign exchange revaluation.

• Rich pipeline of new products: The Company has many products in the process of being submitted for regulatory approval, in pre-commercialization and the early stages of commercialization.

Financial overview of Q1 2021 (In thousands of CAD)

Source: Company

• In Q1 2021, the company’s revenues increased to CAD 46.0 million, against CAD 45.8 million in the previous corresponding period.  The increase in revenue was mainly due to higher sales from new product launches.
• Primarily on the back of higher revenues and lower cost of goods sold the company clocked gross income of CAD 20.5 million against CAD 19.8 million in pcp.
• The company witnessed lower operating expenses that helped the company to minimize its operating loss, which stood at CAD 2.2 million against a loss of CAD 7.4 million in pcp.
• The company recorded a gain on financial instruments along with interest income, which helped in clocking a net income of CAD 3.5 million in the reported period against a loss of CAD 9.4 million in the previous corresponding period.

Risks associated with investment

The Company's products are subjected to regulatory approvals and might be time-consuming, which might further impact the product pipeline. Furthermore, after the GBT transaction, the Company is exposed to additional risks related to investing and operating in international locations, including emerging markets. Operating in such markets carry substantial inherent financial, legal and political risks. 

Valuation Methodology (Illustrative): EV to Sales

Stock recommendation

The company reported decent numbers Q1 2021, thanks to controlled operating expenses and gain on financial instruments. On the operations front, it is progressing on integration while advancing its product portfolio in Canada and Latin America. It received regulatory approvals from Health Canada for NERLYNX®, a drug used for metastatic cancer, which is positive. Furthermore, the Company is focusing on expanding the geographic reach of currently developed branded generics. Besides this recently the company acquired the rights to manufacture, market and sell “Exelon” in Canada and Latin America, is a key positive. Therefore, based on the above rationale and valuation, we recommend a "Speculative Buy" rating on the stock at the closing price of CAD 5.10 on August 03, 2021. We have considered Greenbrook TMS Inc, Medexus Pharmaceuticals Inc, etc. as the peer group for the comparison.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

Technical Analysis Summary

One-Year Technical Price Chart (as on Aug 03, 2021). Source: REFINITIV, Analysis by Kalkine Group 

Glacier Media Inc

Glacier Media Inc (TSX: GVC) is a Canada based company which offers information and marketing solutions. It operates in three segments Environmental, Property and Financial Information, Commodity Information and Community Media.

Key highlights

• Higher cash flow from operations: The company reported higher consolidated cash flow from operations of CAD 5.9 million (before changes in non-cash operating accounts) for the three months ended March 31, 2021, as compared to CAD 0.5 million for the same period in the prior year.

• Disposed JWN energy business: GVIC Communications Corp., a subsidiary of the company, has sold its JWN Energy information business to geoLOGIC systems ltd for CAD 4.5 million in cash and a possible earn-out of up to CAD 3.5 million. The earn-out is based on revenue and will be paid out over three years. It reported a CAD1.2 million receivable related to the discounted deferred consideration as a receivable under other assets.

• Healthy liquidity and leverage Profile: The company’s quick ratio in Q1 2021, stood at 1.24x compared to industry median at 1.13x. The ratio is improving on a continues basis compared to the last sequential quarters, and it shows that company can meet its short-term liabilities comfortably, which is a healthy sign. Moreover, its Debt/Equity ratio stood at 0.06x against the industry median of 1.07x, which is a positive aspect.

Financial overview of Q1 2021 (In thousands of CAD)

Source: company

• In Q1 2021, the company reported CAD 39.5 million revenue, compared to 43.3 million in the previous corresponding period. The revenue fell primarily due to declining print advertising revenue and the cyclical nature of certain businesses of the group. This is partially being offset by the increase in community media digital revenue.
• The company's operating profit increased to CAD 4.4 million in the reported period, compared to CAD 1.9 million in pcp. The increase was mainly due to lower direct expenses, which stood at CAD 25.3 million V/s CAD 31.9 million in pcp.
• Net gain on sale of CAD 2.2 million along with lower interest expense and lower depreciation helped the company to clock a net profit of CAD 3.3 million in Q1 2021, against a net loss of CAD 12.1 million in pcp.

Risks associated with investment

The company derives its revenues from selling advertising and subscriptions related to its publications; a drop in the subscription level can lead to adverse results. Foreign exchange rate fluctuations, the seasonal and cyclical nature of the agricultural and energy sectors, government programs discontinuation, general market conditions in Canada and the United States, changes in the prices of purchased supplies such as newsprint, and cybersecurity risk are among the other risk factors.

Stock recommendation

While the pandemic has had an impact on the Company's operations, its digital media, data, and information businesses have fared better. Revenues have begun to rise and are continuing to rise in several sectors. A significant positive is that the company took substantial steps to decrease operational expenditures in order to ensure that its businesses can function successfully at lower sales levels. Furthermore, the Company is trying to maintain adequate levels of operational income within these limits, as well as making deliberate efforts to improve revenues, profits, and cash flow. On the valuation front, the stock is available at TTM EV/SALES of 0.5x against the industry (Media & Publishing) median of 2.5x. Hence, considering the rationale mentioned above, we have recommended a “Speculative Buy” rating in the stock at the closing price of CAD 0.46 on August 03, 2021, with a lower double digit (in percentage terms) upside potential.

Technical Analysis Summary

One-Year Technical Price Chart (as on Aug 03, 2021). Source: REFINITIV, Analysis by Kalkine Group 

*The reference data in this report has been partly sourced from REFINITIV.

Disclaimer

The advice given by Kalkine Canada Advisory Services Inc. and provided on this website is general information only and it does not take into account your investment objectives, financial situation and the particular needs of any particular person. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. The website www.kalkine.ca is published by Kalkine Canada Advisory Services Inc. The link to our Terms & Conditions has been provided please go through them. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations later.