RBC Capital Markets launched coverage of Knight Therapeutics (TSX:GUD) with an “outperform” rating and price target of $9.50. The stock closed at $7.79 on April 20.
Knight’s focus is on the licensing and acquisition of late-stage pharma products for Canada and select international markets.
“With the shares trading near book value, we see an attractive risk/reward profile and recommend the shares be purchased for investors seeking long-term price appreciation,” writes analyst Doug Miehm.
Knight’s management transformed its last company, Paladin Labs, into a success story through conservative but accretive pharma acquisitions. For example, Paladin limited transactions to 7.0 times EBITDA and never once used debt. Management is now applying the same approach at Knight.
“That being said, we acknowledge that the spec pharma deal environment is more competitive than the last 10-to-15 years at Paladin, suggesting significant value creation could take some time,” Mr. Miehm said.
Not only does the company generate returns on capital by lending to and investing in life science firms, but it also uses these relationships to source licensing opportunities, he added.
