Teaser: I am long Cipher Pharmaceuticals, my biggest holding. EV/EBIT = 2!!!!

Originally posted on reddit: 

https://www.reddit.com/r/MicrocapVillage/comments/n8w473/teaser_i_am_long_cipher_pharmaceuticals_my/

I have been meaning to do a deep dive. I am too lazy. You need to know why I am long the stock.

I will do a comprehensive analysis.

All numbers in CAD.

Share price: $1.46. My cost basis: $1.35. 28,000 shares.

Name: Cipher Pharmaceuticals.

Ticker: CPH.TO

Market Cap: $36 MM

Cash: $9 MM

Current assets (Cash+ receivables): $20 MM

Total Liabilities: $11 MM

Net Cash: $9 MM

Enterprise Value: $26 MM

Normalized EBIT: $12 MM

EV/EBIT = 2. Do I have to scream louder?

This is a turnaround story with two years of consistent earnings. Starting 2018 (three fiscal years) new management with substantial stake has turned the company around. Now it's EV/EBIT = 2. Normalized earnings, ofc. Future earnings look same as before.

Yahoo finance description: https://ca.finance.yahoo.com/quote/CPH.TO/

Cipher Pharmaceuticals Inc. operates as a specialty pharmaceutical company in Canada. Its commercial products include Epuris (CIP-ISOTRETINOIN), a formulation of the active ingredient isotretinoin for use in the treatment of severe acne; Ozenoxacin to treat adult and paediatric patients with impetigo; Actikerall, which is indicated for the treatment of palpable or moderately thick hyperkeratotic actinic keratosis; Vaniqa, a prescription cream that reduces the growth of unwanted facial hair in women; BRINAVESS, a treatment for sinus rhythm in adults; and AGGRASTAT, an intravenous anti-platelet drug. The company's licensed products comprise CIP-Isotretinoin; Lipofen (CIP-Fenofibrate), a formulation of the active ingredient fenofibrate used for the treatment of hyperlipidemia, a cholesterol disorder; and Conzip/Durela (CIP- Tramadol), a formulation of the active ingredient tramadol for the management of moderate to moderately severe pain. Its pipeline products also include Trevyent, a vasodilatory prostacyclin analogue to treat pulmonary arterial hypertension; CF-101 for severe plaque psoriasis and rheumatoid arthritis; MOB-015, a topical formulation of terbinafine for the treatment of onychomycosis; and DTR-001, a tattoo removal cream. Cipher Pharmaceuticals Inc. was founded in 2000 and is headquartered in Oakville, Canada.

Technical analysis: After many years of downward stonk pressure, the sellers are gone, and now only diamond hands are holding. That means 🚀🚀🚀🚀🚀🚀.

Forward guidance:

Numbers in CAD, millions.

	2017	2018	2019	2020	2021	2022
Revenue	40.14	22.75	22.45	21.61	22.92	20.28
Normalized EBIT	25.06	5.72	11.50	12.16	16.47	16.82

In 2018, they implemented cost-cutting as part of turnaround. In the earnings call they said they are looking to acquire positive cash flow drugs. They have partnered with Verity Pharmaceutical is distribute three drugs to the healthcare sector in Canada. Their agreement is a royalty agreement. So it comes to no cost as Cipher Pharmaceuticals, they only get royalties other partner makes a profit. *separate* They have three drugs in their pipeline. *growth*. But I am excluding this in the calculation. This is all bonus, icing on the cake, cherry on top.

These forward estimates are very conservative. Significant insider buying says otherwise.

Insider ownership: 40%. Chairman owns 39%, almost about to die. Rest 1% owned by CEO, CFO, etc..

Insider buying recently:

Courtesy of CEO.ca

Problems:

Obviously there is hair on this stock, but it is overstated, market too pessimistic.

50% of their revenue comes from one product: Absorica.

These guys get licensing royalties from Absorica. It's an Accutane generic (yes the stuff you use on acne.) There are four competitors in this generic fight off. Absorica owns 6% of market share. I don't think it's going to go down. There is not going to be an alternative to absorica, not in the latest studies.

I will do a comprehensive analysis, have to.

Financials from TIKR. https://app.tikr.com/register?ref=9bsel3

Learn all about CPH SEDAR filings https://www.sedar.com/DisplayCompanyDocuments.do?lang=EN&issuerNo=00020415.