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Buying A High Growth Specialty Pharma Company for 7 times EPS (MPH - TSXV - $5.90)

 

Medicure is a small orphaned specialty pharma with a product (Aggrastat) targeting the cardiology market in the United States that had not been properly marketed until last year. Due to significant cost as well as delivery advantages, Aggrastat is rapidly taking market share away from its two main competitors. Based on sales of this drug alone, Medicure is expected to earn $0.85 in 2016 and $1.28 in 2017 (Mackie).

 

As well, Medicure has other indications for this drug that are expected to open up additional markets for this later in 2016 and 2018. Further upside resides in an option MPH has to buy 100% of a US based complex drug manufacturer that is experiencing rapid growth (2012 $5mm, 2013 $10.3mm, 2014 $14mm, 2015 $20mm+ US dollars). I expect them to exercise this option during 2016.

 

Corporate Presentation....

http://www.medicure.com/upload/pdfs/Investor_Presentation_q4_2015.pdf

 

Research note from Mackie Capital 15 January 2016

MEDICURE INC. – BUY

 

“The World is Yours” – Scarface (movie)

 

Opportunity Knocks: Aggrastat’s main branded competitor, Integrilin (Merck), has run

into supply issues. With Aggrastat’s market share already climbing, this development can

also serve to benefit Aggrastat’s competitive position and instills further confidence in our

sales estimates. MPH is up 164% since we initiated on September 26, 2014.

 

DETAILS – The Perfect Storm

 

Competitor Has Supply Issues – Opportunity Opens The Door For Aggrastat:

Concerning the supply shortage of Integrilin, “Merck cannot provide a reason for the

shortage” and while the drug is on back order, the company cannot estimate a release date

(http://goo.gl/1VtAo7). There are two generic versions of Integrilin (both of which are

priced higher than Aggrastat). The lowest priced generic of Integrilin is priced at

US$1250/patient. In contrast, Aggrastat is priced at a mere US$517/patient.

Aggrastat Market Share Climbing: Medicure recently pre-released better than expected,

Q4 FY15 sales estimates – they cited an increased market share and beneficial US/CAN

exchange rates. Management has indicated that Aggrastat’s market share is increasing. In

June 2015, the US market for GP IIb/IIIa was approximately US$274.5 million – at that

time Integrilin comprised the largest share with sales of approximately US$200M. This

Integrilin supply issue should help shift hospital utilization towards Aggrastat. Based on

this news, we believe our 2016 Aggrastat sales estimate of US$36M to be conservative.

 

IMPACT – Aggrastat May Surprise On The Upside

 

We are still applying a 7.5x EV/EBITDA multiple to our 2016 EBITDA estimate of

C$15.4M – the Canadian and global mid cap specialty pharma sector are trading at 7.4x

and 8.0x 2016 EV/EBITDA, respectively. We expect MPH’s stock to continue to appreciate

in conjunction with Aggrastat’s sales growth, and also trade up into the July 10th PDUFA

date for its sNDA.

 

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Why is it cheap and what are the risks?

 

Cheap - illiquid & micro capitalization along with being relatively unknown even in Canada. However this is changing as it produces outstanding results, grows in cap and trading volumes increase.

 

Risks - same as with any small cap pharma company. Particularly concentration risk in Aggrastat. US/Cdn $ exchange rate. Generic risk already established but beats on pricing, efficacy and ease of use. Risk that Apicore option does not get exercised for some reason but this option not currently reflected in the corp mkt valuation. Mgmt is heavily invested & competent - could be succession risk.

 

 

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More on Medicure's option to buy 100% of niche drug developer Apicore. The following is from PI Financial analyst...

Sheila Broughton, MBA, CFA

sheilab@pifinancialcorp.com 604.664.2695

 

 

Apicore option.

 

Medicure currently owns 5% of private company Apicore and has an option to

buy the remaining 95%. This option was earned in a financing transaction for Apicore established

in July 2014. The option price is a non-disclosed, predetermined fixed price. At this time, we

anticipate Medicure exercising this option in early 2017 (option expires July 2017) and anticipate

new financing (debt and equity) will be required to finance this process. We note that option

exercise (if it is exercised) could be anytime between now and July 2017.

 

We believe ownership of Apicore could be a transformational transaction for Medicure.

Apicore is a niche private manufacturer of active pharmaceutical ingredients (API) and developer of

selective generic products for pharmaceutical companies. Apicore focuses on higher margin

complex synthetic chemistry, hard to manufacture therapeutics with secure, high quality

manufacturing operations in the US and India.

 

Apicore’s revenue has rapidly increased over the last 3 years from approximately US$5M in 2012

to US$14M in 2014. The company also has a growing base of US commercial products (increased

from 3 in 2012 to 8 in 2014). Based on current FDA filings and pending products we anticipate

2015 revenue of ~US$20M. We understand Apicore is already cash flow positive and is in

compliance with all required financing charges.

 

Apicore was founded in New Jersey in 2004 and received its first FDA approval in 2006. To

support increased demand, its Vadodara, Gujarat, India facility was expanded in 2013/14. With over

50 international customers including Mylan, Teva and Sandoz) it produces over 80 products and

has ~200 employees.

 

With a focus on hard to make niche drugs, Apicore typically approaches high value generics

companies with drug ideas that management sees an opportunity to address. Apicore structures

its drug opportunities to support high margins through a fixed margin on the raw drug or for select

products through sharing both development costs and profit with the pharmaceutical company.

 

 

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Any idea what caused the move? Interesting idea...has the company indicated what their expectations are when patents expire?

 

The patents have already expired and there is generic competition for Medicure's Aggrastat. If you look at the Company's presentation, the price of their product is much lower than the generics and Merck's and there are benefits to Aggrastat not in the competing products.

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  • 3 weeks later...

http://seekingalpha.com/article/3897776-undervalued-underfollowed-medicure-favorite-pharma-small-cap

 

Undervalued And Underfollowed; Medicure Is My Favorite Pharma Small Cap

 

Must Read|Feb. 16, 2016 7:57 AM ET|6 comments | About: Medicure Inc. (MCUJF)

 

Summary

 

One proven product on the market.

 

Strong operating momentum, profitable and cash flow positive.

 

Multiple catalysts and growth opportunities over the next couple of years.

 

Lack of coverage and awareness probably main reason for low valuation.

 

 

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New Coverage

 

MEDICURE INC. (MPH – TSXV, $6.99) Rating: Buy

 

12-Month Target Price: $9.00

 

SPEC PHARMA WITH COMPELLING UPSIDE

 

 Specialty pharmaceutical company focused on the sale and marketing of an acute cardiovascular drug, Aggrastat

 

 Strong gross margin and EBITDA growth expected to continue

 

 We estimate $1.50 per share in our target for the acquisition of privately held Apicore LLC (currently 5% interest, fixed price purchase option)

 

 Trades at 3.9x our F2017E EBITDA of $26.0 million; our $9.00 target is based on 7.5x

 

INITIATING COVERAGE – BUY $9.00

 

We are initiating coverage of Medicure Inc. with a Buy rating and one-year target price of $9.00, implying a rate of return of 29%. Our target is based on a 7.5x multiple applied to our F2017E EBITDA of $26.0 million. We compare Medicure to Canadian and select US specialty pharmaceutical companies, and small and large US contract pharma manufacturing companies. On F2017, peers are trading between 2.0x – 3.0x sales and 5.0x – 10.0x EBITDA. We believe that MPH deserves a slight premium multiple to peers in the CDN spec pharma space to reflect the diversification from the acquisition of Apicore, which we expect the company completes in H1/17. MPH is currently trading at 3.9x our F2017E EBITDA estimate on an EV/EBITDA basis.

 

COMPANY HIGHLIGHTS

 

Medicure Inc. is a specialty pharmaceutical company primarily focused on the sale and marketing of an acute cardiovascular drug, Aggrastat, in the US. Within the last two years Aggrastat has seen rapid growth that has contributed to positive EBITDA for Medicure. The company markets Aggrastat directly to US hospitals via a salesforce competing with two other main products for a market estimated at US$280 million in annual sales in the US alone in 2014.

 

Sales of Aggrastat have ramped quickly and received increased uptake from hospitals since the management team applied for and successfully received a dosing label change in October 2013. Medicure achieved Aggrastat revenue of $5.3 million in a seven month period in 2014, and $21.9 million in 2015, selling in US dollars with Canadian costs, generating positive forex effects.

 

Strong margin and EBITDA growth expected to continue. Gross margins on Aggrastat are expected to remain strong (>80%) as much of the sale of Aggrastat falls to Medicure’s bottom line.

 

Medicure is currently not being given credit for its fixed price option to purchase privately held Apicore LLC (currently 5% equity interest), a generic drug manufacturer that would diversify Medicure’s product offering and provide upside beyond just Aggrastat. Medicure management has indicated it would like to pursue acquiring the remaining stake in Apicore, and we model the company executing on this strategic transaction in early 2017.

 

Apicore adds significant upside. Apicore has steadily grown revenue almost 200% over the last three years from US$5.0M in 2012, US$10.3M in 2013, and US$14.3M in 2014 (all unaudited figures). We estimate that Apicore has margins similar to other contract manufacturers and that the Apicore business operates at a 30% gross margin and a 17.5% EBITDA margin. We believe there is room for top line and margin growth coming from products Apicore shares economics on.

 

UPCOMING CATALYSTS & MILESTONES

 

 Late March 2016 – YE2015 financial results

 

 July 10, 2016 – PDUFA date for Aggrastat label expansion

 

 H1/17 – Apicore acquisition

 

For more information, please see our complete initiation report published today.

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  • 1 year later...

Medicure now owns over 90% of Apicore - without further dilution!

 

Medicure Inc

Symbol C : MPH

Shares Issued 15,633,127

Close 2017-07-10 C$ 8.21

 

2017-07-10 18:40 ET - News Release

 

An anonymous director reports

 

MEDICURE EXERCISES OPTION TO ACQUIRE ADDITIONAL INTERESTS IN APICORE

 

Medicure Inc. and its wholly owned Mauritian subsidiary have exercised their option to acquire additional interests in Apicore Inc. and Apicore LLC from Apicore's founding shareholders. The Option exercise allows for the acquisition of all of the shares of Apicore Inc. and Apicore LLC held by the founding shareholders (representing approximately 32% of the fully diluted ownership of Apicore) for US$24.5 million, being the price provided for under the Option. This acquisition brings Medicure's ownership in Apicore Inc. to approximately 98% (94% on a fully diluted basis). Medicure expects to close the acquisition by July 14, 2017.

 

Additionally, Apicore has repaid the US$9.8 million secured loan previously provided to Apicore by Medicure that was announced on January 9, 2017.

 

Medicure's initial ownership interest and option rights in Apicore were obtained for its lead role in structuring and participating in a majority interest purchase and financing of Apicore that occurred on July 3, 2014. Medicure acquired a majority interest in Apicore through the exercise of its option rights on December 1, 2016.

 

Apicore has provided a US$14.8 million loan to Medicure bearing interest at 12% per annum with a term of three years. These funds were obtained from Apicore's current business which includes API sales, ANDA development partnership payments, and royalty and upfront payments from ANDA commercial partnerships. The loan proceeds will be used by Medicure to help satisfy the purchase price under the Option exercise.

 

About Medicure Inc.

 

Medicure is a specialty pharmaceutical company focused on the development and commercialization of therapeutics for the U.S. hospital market. The primary focus of the Company is the marketing and distribution of AGGRASTAT (tirofiban hydrochloride) in the United States, where it is sold through the Company's U.S. subsidiary, Medicure Pharma, Inc. Additionally, Medicure holds a majority interest in Apicore. For more information on Medicure please visit www.medicure.com.

 

About Apicore

 

Apicore is a private, New Jersey based developer and manufacturer of specialty Active Pharmaceutical Ingredients ("APIs") and pharmaceuticals, including over 15 Abbreviated New Drug Applications ("ANDAs"), one of which, is partnered with Medicure. Apicore manufactures over 100 different API's, including over 35 for which Drug Master Files have been submitted to the FDA and 16 that are approved for commercial sale in the U.S. by customers of Apicore. Apicore specializes in the manufacture of difficult to synthesize, high value and other niche API's for many U.S. and international generic and branded pharmaceutical companies. Apicore has two FDA-approved facilities. In the U.S., the Somerset, New Jersey facility can produce a few grams up to 200 kg volumes and in India, the Vadodara, Gujarat facility can produce a few kilograms up to 60 metric tons yearly. Both facilities are equipped with state-of-the-art analytical and research capabilities. For more information, please visit Apicore online at www.apicore.com.

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(V-MPH) $8.21

RATING: BUY

(unchanged)

TARGET: $17.40

(increased, previously $13.25)

 

Medicure exercises option to acquire additional interests in Apicore

 

 EVENT: Medicure announced that they have exercised their option to acquire additional interests in Apicore Inc. The option exercise allows for the acquisition of 32% of Apicore for US$24.5 million. The acquisition brings Medicure’s ownership in Apicore to 98% (94% fd).

 

 DISCUSSION: To fund the acquisition; Apicore has repaid the US$9.8 million loan provided by Medicure and Apicore provided a US$14.8 million loan to Medicure, bearing interest at 12% for three years. The loan will be consolidated in the financial statements, so will not impact our numbers.

 These funds were obtained from Apicore’s current business, including royalty and upfront payments from ANDA commercial partnerships. Management would not disclose the terms nor conditions of these payments for competitive and confidentiality reasons. We are bringing all US$24.6 million of these payments to Apicore into Medicure’s Q3/17 results and have reduced our Q4/17 and 2018 numbers.

 

IMPACT: Positive. We have been waiting for management to consolidate the remainder of Apicore. They have done it in a non-dilutive manner.

 

 We have increased our EBITDA forecasts. For 2017, we have

increased revenue, to $78.6M (previously $65.4M) and Adj. EBITDA to 100

$34.0M (previously $15.8M). We are forecasting 2018 revenue of $66.1M (previously $78.9M) and Adj. EBITDA of $22.3M (previously $27.2M). Our forecasts are highly dependent on how these upfront payments impact future revenue and the period of time they cover.

 

 VALUATION/RECOMMENDATION: We maintain our BUY rating and ABOVE AVERAGE risk rating for Medicure. We have increased our 12- month target price to $17.40 (previously $13.25). Given the unusually large upfront payments, which we assume have little costs involved, have skewed our 2017 forecasts, our target now reflects an 11.6x EV/EBITDA on our 2018 forecast (previously 10.6x and an average of our 2017 and 2018 forecast).

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  • 1 year later...

This is getting interesting here:

 

$72mn of cash on the balance sheet, plus a $10mn USD ($13mn CAD) receivable due next year vs. a $97mn market cap (so only a $12mn EV).

 

5 new drugs coming between now and 2020, salesforce already in place to run it through the distribution channels, so the incremental margins with GM's at 70-90% are very very high. Company operates roughly at cash flow breakeven today, so it's a very cheap option on future growth.

 

CEO owns 15% of the company, and I think made a wise decision to sell Apicore, realizing 100% IRR's on that investment, so I doubt they're going to do something really dumb with the cash.

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Yep - when your Company gets Bob Tattersall's attention, you have to know it's cheap...

 

Caught up in net-net: 12 Canadian value stocks that pass the test

 

Robert Tattersall, CFA, is co-founder of the Saxon family of mutual funds and the retired chief investment officer of Mackenzie Investments.

 

For quite a number of years, I wrote articles for Report on Business in early December that looked for bargains tossed out by discouraged tax-loss sellers. As a value investor, my preferred strategy to identify these bargains was the classic net-net working capital screen favoured by the original value investor, Benjamin Graham.

 

These are stocks that trade below the value of current assets minus all liabilities. No value is given to fixed assets or intangibles such as goodwill or patents. In theory, you could sell the current assets at face value, pay off all of the liabilities in full and still have more cash per share remaining in your pocket than the current stock price. And you haven’t even started to liquidate the fixed assets!

 

The list of candidates ebbs and flows depending on the overall market level and the industry sectors out of favour, but I finally stopped writing on the topic two years ago in December, 2016. The reason was simple: There was only one Canadian name on the list and it was a recurring value trap – wholesale lumber distributor Goodfellow Inc. (GDL-T). At the time, I suggested that the shrinking number of net-net stocks was simply nature’s way of telling us that the Canadian stock market was quite fully valued. In the intervening two years, the S&P/TSX Composite Index traded as much as 7 per cent higher, but it has not been a favourable environment for value investors and the market is now down about 2 per cent from December, 2016.

 

The recent market turmoil has prompted me to revisit the net-net screen in the hope that a fresh crop of bargains might have emerged. I asked David Sandel of Simcoe Capital in New York to run a screen of global equities that meet this rigorous criterion. As a practical matter, many of these low-priced stocks move in and out of contention on small price changes, so we accept stocks that trade at a premium of up to 20 per cent over net-net.

 

As of mid-November, the global list contains more than 2,000 names, up from 900 in late 2016. More than half of them are located in Asian markets such as Taiwan, Malaysia and Japan. It will be difficult for an individual investor to participate directly in these markets, but a country-specific ETF with a tilt toward small-cap names would likely capture the value element.

 

Turning to the Canadian market, there are now 12 candidates that trade within a 20-per-cent premium to net-net working capital – including the perennial Goodfellow. The other names, ranked by increasing valuation discount to net-net (that is, becoming cheaper or more troubled) are:

 

Hammond Power Solutions Inc. (HPS.A-T), Hardwoods Distribution Inc. (HDI-T), Corridor Resources Inc. (CDH-T), Cathedral Energy Services Ltd. (CET-T), Rocky Mountain Dealerships Inc. (RME-T), Medicure Inc. (MPH-TSXV), Reitmans Ltd. (RET.A-T), Redline Communications Group Inc. (RDL-T), Velan Inc. (VLN-T), Transat A.T. Inc. (TRZ-T), Sprott Resource Holdings Inc. (SRHI-T).

 

Needless to say, the output from this type of screen is very much a function of the quality of the database. These are often stale-dated – it is important to check the latest quarterly financials on the company website or SEDAR to be sure that you haven’t missed a stock split or corporate reorganization. The good news, though, is that Canadian value investors now have a dozen candidates to research in their quest for a diamond in the rough. The bad news is that all of them have a market capitalization less than $300-million so trading liquidity may be an issue, even for a small investor.

 

 

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Yep - when your Company gets Bob Tattersall's attention, you have to know it's cheap...

 

Caught up in net-net: 12 Canadian value stocks that pass the test

 

Robert Tattersall, CFA, is co-founder of the Saxon family of mutual funds and the retired chief investment officer of Mackenzie Investments.

 

For quite a number of years, I wrote articles for Report on Business in early December that looked for bargains tossed out by discouraged tax-loss sellers. As a value investor, my preferred strategy to identify these bargains was the classic net-net working capital screen favoured by the original value investor, Benjamin Graham.

 

These are stocks that trade below the value of current assets minus all liabilities. No value is given to fixed assets or intangibles such as goodwill or patents. In theory, you could sell the current assets at face value, pay off all of the liabilities in full and still have more cash per share remaining in your pocket than the current stock price. And you haven’t even started to liquidate the fixed assets!

 

The list of candidates ebbs and flows depending on the overall market level and the industry sectors out of favour, but I finally stopped writing on the topic two years ago in December, 2016. The reason was simple: There was only one Canadian name on the list and it was a recurring value trap – wholesale lumber distributor Goodfellow Inc. (GDL-T). At the time, I suggested that the shrinking number of net-net stocks was simply nature’s way of telling us that the Canadian stock market was quite fully valued. In the intervening two years, the S&P/TSX Composite Index traded as much as 7 per cent higher, but it has not been a favourable environment for value investors and the market is now down about 2 per cent from December, 2016.

 

The recent market turmoil has prompted me to revisit the net-net screen in the hope that a fresh crop of bargains might have emerged. I asked David Sandel of Simcoe Capital in New York to run a screen of global equities that meet this rigorous criterion. As a practical matter, many of these low-priced stocks move in and out of contention on small price changes, so we accept stocks that trade at a premium of up to 20 per cent over net-net.

 

As of mid-November, the global list contains more than 2,000 names, up from 900 in late 2016. More than half of them are located in Asian markets such as Taiwan, Malaysia and Japan. It will be difficult for an individual investor to participate directly in these markets, but a country-specific ETF with a tilt toward small-cap names would likely capture the value element.

 

Turning to the Canadian market, there are now 12 candidates that trade within a 20-per-cent premium to net-net working capital – including the perennial Goodfellow. The other names, ranked by increasing valuation discount to net-net (that is, becoming cheaper or more troubled) are:

 

Hammond Power Solutions Inc. (HPS.A-T), Hardwoods Distribution Inc. (HDI-T), Corridor Resources Inc. (CDH-T), Cathedral Energy Services Ltd. (CET-T), Rocky Mountain Dealerships Inc. (RME-T), Medicure Inc. (MPH-TSXV), Reitmans Ltd. (RET.A-T), Redline Communications Group Inc. (RDL-T), Velan Inc. (VLN-T), Transat A.T. Inc. (TRZ-T), Sprott Resource Holdings Inc. (SRHI-T).

 

Needless to say, the output from this type of screen is very much a function of the quality of the database. These are often stale-dated – it is important to check the latest quarterly financials on the company website or SEDAR to be sure that you haven’t missed a stock split or corporate reorganization. The good news, though, is that Canadian value investors now have a dozen candidates to research in their quest for a diamond in the rough. The bad news is that all of them have a market capitalization less than $300-million so trading liquidity may be an issue, even for a small investor.

 

That's a pretty superficial analysis.

 

Misses, for instance, that Zypitamag sells for 1/3 the cost of it's competitor, yet is as effective, and it's competitor does $270mn of sales. At 10% market share, that's $27m USD in sales (35mn CAD). Stick a 3x EV/Sales on that, and that's $105mn in value created, which is double from here.

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  • 1 month later...

Quick primer on the company.  No investment myself but it's on my watchlist.

 

This summer — after about three years of complicated option and loan deals — Medicure Inc., the Winnipeg-based specialty pharmaceutical company, completed the acquisition of the New Jersey-based drug component manufacturer, Apicore Inc.

 

Then on Tuesday, Medicure sold the company to an unnamed multinational pharmaceutical company at a substantial profit.

 

The selling price was US$105 million, with additional earn-out payments to Medicure expected over the next 18 months.

..

After Medicure’s own novel heart drug failed in its Phase III clinical trials in 2007, wiping out about $100 million of investment, the company reinvented itself by doubling down on efforts to sell Aggrastat, a heart drug to which it had the U.S. rights.

 

Since then sales of the blood-thinner, orphaned by Merck some years ago but now used for more critical applications in terms of heart-attack patients, has grown substantially. Through the first six months of 2017, sales of Aggrastat were $15 million, compared to $13.8 million during the same period last year.

 

The company also has three generic heart drugs in development.

 

https://www.winnipegfreepress.com/business/medicure-earns-tidy-profit-selling-apicore-449330673.html

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  • 4 weeks later...

This seems to be one of the more attractive stocks after the market runup.  With net current assets at around 80% of market cap, the business doesn't have to deliver anything exceptional.  With the high GM and SG&A in place, they are really operationally levered and any additional sales should drop to the bottom line.

 

I like the ceo.  He is not perfect, not buffet, but he doesn't come off as a shark either.  He has a long history in pharma space and community, you can look it up, and I think he will do his best to make the business succeed.  At the very least, and I could be wrong, but I don't think you have to worry as much about a take-over or the other shady things that happen in micro-cap land.

 

They are also buying back shares right now, it looks like around 1% of outstanding have been purchased in the last 30 days.  Interesting to see a micro-cap already cannibalizing.  Given that the stock is above tangible book I am hoping they see some sales growth ahead, otherwise it doesn't make much sense to do buy backs.

 

I bought quite a bit during the dip, although at levels just a touch below where we are now.  It is probably 5% of my portfolio.

 

 

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This seems to be one of the more attractive stocks after the market runup.  With net current assets at around 80% of market cap, the business doesn't have to deliver anything exceptional.  With the high GM and SG&A in place, they are really operationally levered and any additional sales should drop to the bottom line.

 

I like the ceo.  He is not perfect, not buffet, but he doesn't come off as a shark either.  He has a long history in pharma space and community, you can look it up, and I think he will do his best to make the business succeed.  At the very least, and I could be wrong, but I don't think you have to worry as much about a take-over or the other shady things that happen in micro-cap land.

 

They are also buying back shares right now, it looks like around 1% of outstanding have been purchased in the last 30 days.  Interesting to see a micro-cap already cannibalizing.  Given that the stock is above tangible book I am hoping they see some sales growth ahead, otherwise it doesn't make much sense to do buy backs.

 

I bought quite a bit during the dip, although at levels just a touch below where we are now.  It is probably 5% of my portfolio.

 

Thanks for the info.  It looks like today you have $30mm EV ($115 mc less $72mm net cash less $13mm receivable).  I have a couple quick questions if you wouldn't mind bringing me up to speed:

 

1.  An earlier post on this thread has an analyst report forecasting FY17 adj ebitda of $16mm for standalone Medicure (i.e., excluding Apicore results).  The current investor presentation shows FY2017 adj ebitda at $4.6mm (presumably only 9months of the year to date).  Can you help bridge the remaining $11mm difference?  Is there a reason why Q4 would account for the difference or have sales fell off/expenses increased?

2.  How does this look like from a FCF perspective?  i.e. pro forma FCF after taxes & capex?

3.  Aggrestat is patented until 2023.  Is there any risk here?  I think the response is that aggrestat is cheaper than competitors but just want to confirm that is part of the thesis

 

Thanks for the interesting idea.

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I disagree on the EV calc.  I see 15.7m shares so $100.5m at $6.40?    There are options and warrants but the options have an average price of $4 and the options $6.50 as I recall. I think you would see $11.5M if it was all exercised.    Are you including that in EV because I think you are using diluted share count.

 

That forecast must have had some ambitious sales targets.  They just aren't hitting those numbers right now.

 

You have to think that SG&A is going to be elevated right now without apicore.  I am just focused on revenue for now and happy they are not bleeding cash.  Gross margins run around 75-80% so if they are able to add sales,  a high proportion is going to hit EBITDA. 

 

I think of this one as a portfolio company, similar to knight (gud.to).  You are depending on management being able to find deals and grow sales. I don't know exactly where the sales will come from.  Prexxartan might start up, Zypitimag has some ambitious targets but I don't really know how it all shakes out.

 

I think if I can find 20 companies like this one, across different sectors, maybe I will do okay regardless of the market.

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Here's latest I have from the PI analyst...

 

MEDICURE INC. (V-MPH)

 

Rating: BUY, Target: $12.50

 

WAITING FOR 2019!

 

 We have chosen MPH as our one of our Value Picks for 2019. Medicure, with

$4.77 per share in cash, trades at 17% of its peer group’s EV/EBITDA of 13.7x at 2.3x

our 2018 estimate and 0.8x our 2019 estimate. Trading at $5.71, cash makes up 83%

of its value. Investors are giving very little value to Medicure’s upcoming lineup of

drugs: Zypitamag, Sodium Nitroprusside and two ANDAs that are expected to be

filed with the FDA in Q1/19.

 

 During Q3/19, revenue rose 4.8% to $7.35M, adjusted EBITDA dropped to $0.5M

from $1.8M last year, while the Company reported a net loss of $0.5M (-$0.03/f.d.

share) versus a loss of $4.3M (-$0.29/f.d. share) last year. The majority (95%) of

revenue this quarter and for the year will come from sales of Aggrastat®. However,

the 30% increase in revenue to $37.8M in 2019 will come from Zypitamag and

Sodium Nitroprusside.

 

 Management noted that they are still waiting for a number of insurance companies to

allow coverage of Zypitamag. Once that happens, sometime next year, we estimate

sales will be over $1.0M per quarter. The Company finally got approval from the FDA

for its Sodium Nitroprusside generic. IQVIA estimates that branded and generic sales

of Sodium Nitroprusside injection are about US$75M. Medicure is not the first

generic to launch, so we’ve conservatively estimated that sales will reach US$7.5M

over two years. Management noted that the two ANDAs they are working on will

most likely not be filed with the FDA until Q1/19. We are conservatively forecasting

that it will take 18 months for approval.

 

 We believe management has a close relationship with Zydus, from whom Medicure

acquired the license to sell branded drug Zypitamag. Zydus’s parent, Cadila

Healthcare, CADILAHC (NSE), is a very large Indian pharmaceutical company. It is a

significant manufacturer of generic drugs. We believe there could be more branded

products coming from Zydus, which Medicure would have the opportunity to license

and the cash to pay for it.

 

 FORECAST/OUTLOOK: We are forecasting 2018 revenue of $28.9M and Adj.

EBITDA of $3.6M. For 2019 we are estimating revenue of $37.8M and Adj. EBITDA

of $9.7M.

 

 VALUATION/RECOMMENDATION: We are using the peer group multiple of 13.7x

to arrive at our 12-month target of $12.50, while maintaining our BUY rating,

ABOVE AVERAGE risk rating.

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  • 2 weeks later...

WINNIPEG, Jan. 28, 2019 /CNW/ - Medicure Inc. ("Medicure" or the "Company") (TSXV:MPH,OTC: MCUJF), a cardiovascular pharmaceutical company, is pleased to announce it has entered into an agreement with Sensible Medical Innovations Inc. ("Sensible") to become the exclusive marketing partner for the ReDS™ point of care system ("ReDS") in the United States. ReDS is a non-invasive, FDA-cleared medical device that provides an accurate, actionable and absolute measurement of lung fluid which is important in the management of congestive heart failure. The lung fluid measurements are used in guiding treatment and monitoring a heart failure patient's condition and may lead to a significant decrease in readmissions and hospital costs.  Clinical studies have shown an 87% reduction in heart failure readmission rates for patients using the ReDS system at home for three months post-discharge versus those who were treated with usual care alone. ReDS is already marketed to U.S. hospitals by Sensible and Medicure expects to begin marketing ReDS immediately using its existing commercial organization.  Under the terms of the agreement, Medicure will receive a percentage of total U.S. sales revenue of the device and must meet minimum annual sales quotas. 

 

In addition, Medicure has invested US$10.0 million in Sensible for a 7.71% equity stake on a fully diluted basis. In connection with the investment, Medicure's President and CEO, Dr. Albert D. Friesen, has been appointed to the Board of Directors of Sensible.

 

https://www.newswire.ca/news-releases/medicure-announces-agreement-to-market-reds-tm-device-for-congestive-heart-failure-patients-in-the-united-states-818650218.html

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  • 9 months later...
Medicure Inc. ("Medicure" or the "Company") (TSXV:MPH, OTC:MCUJF), a cardiovascular pharmaceutical company, today announced its intention to commence a substantial issuer bid (the "Offer") pursuant to which the Company will offer to purchase up to 4.0 million of its common shares (the "Common Shares") for cancellation at a set purchase price of $6.50 per Common Share for a total purchase price of up to $26.0 million in cash. The Offer will be funded from the Company's existing cash on hand.

 

It was trading at ~$3.30 before the announcement.  Stock is up almost 50% on the news.  They are buying roughly 27% of the outstanding stock back, using cash on hand.

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