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Micro-Cap Insider
Micro stocks. Maximum profits

Cabot Micro-Cap Insider Special Bulletin

This morning, this portfolio stock reported results for the fiscal year ending March 31, 2020.

Medexus Reports Excellent Quarter, Raising Buy Limit

This morning, Medexus Pharmaceuticals (PDDPF) reported results for the fiscal year ending March 31, 2020.

More importantly, PDDPF reported quarterly results for the quarter ending March 31, 2020.

The key aspect of the Medexus investment case is that the company has recently acquired a hemophilia drug called XINITY. The revenue produced from this drug is extremely accretive because Medexus now benefits from ~$40 million of XINITY sales, but doesn’t have to add much in the way of additional costs.

Medexus wrote in its press release:

“The integration of IXINITY® is complete and it leverages our existing US based infrastructure, as we have added a product generating approximately $40 million of revenue on an annual basis (based on the twelve-month period ended December 31, 2019) with roughly the same number of employees as we had before the acquisition.”

As a result of the transformative acquisition, Medexus generated adjusted EBITDA of $4.2 million in the quarter or $16.8 million on an annualized basis.

Better yet, revenue grew organically 27%. So clearly there is significant growth ahead.

One other positive is that Medexus bought back 919,000 shares (~9% of shares outstanding) in the past fiscal year including 139,400 in the most recent quarter.

Based on Medexus’ run rate EBITDA of $16.8 million, the stock is currently trading at an EV/EBITDA multiple of 5.6x and an EV/Revenue multiple of 0.9x.

It’s even cheaper on forward estimates.

Specialty pharma companies trade at an average EV/EBITDA multiple of 16.5x and an EV/Revenue multiple of 3.4x.

Previously, I recommended buying under 2.32, but given the excellent execution by the company and its clear undervaluation, I’m raising my buy under target to Buy under 2.50. When buying PDDPF or any other micro cap, be sure to use limits and try to buy the stock as close to its current market price as possible.

My long-term price target is 5.37.

Disclosure: Rich Howe owns shares in PDDPF. Rich will only buy shares after he has shared his recommendation with Cabot Micro-Cap Insider members and will follow his rating guidelines.