Knight Therapeutics (GUD.TO)

Something as a long-term hold in healthcare? An ideal stock for the long-term, probably would be Knight Therapeutics run by Jonathan Goodman, who ran Paladin, which was eventually sold at $140 after 19 years. A very deeply experienced man. The stock has held in well, but hasn’t done anything particularly aggressive for some time.

This is more of a cash shell, but also has some products. Excellent management team. One thing; this trades above cash, and he likes to trade at a discount to cash.

A pharmaceutical company run by Johnson Goodman, who was also the cofounder of Paladin Labs, probably one of the best management teams you can find, and probably one of the best healthcare companies in Canada. Half their market cap is in cash, and they are either investing in the equity of companies, financing companies with debt at attractive interest rates, and/or investing in healthcare funds. These investments get their foot in the door, and then they can license out their products. Half their market cap is in cash, so half their value is doing nothing right now. You have to be patient. It may not do what you want in a year, but over a longer-term period, they are going to create great returns for investors. (Analysts’ price target is $11.00.)

Phenomenal management. You have to look at this as a big mutual fund of investments in healthcare and biotech. They are sitting on a ton of cash, and probably just waiting in the weeds for some fallout from some of the other companies in order to make a big move. This is for extremely patient investors. As a long-term investment for your kids and grandchildren, you can’t go wrong.

Over the long-term, you can’t go wrong with this. You are paying premium for their BV at this point. It has a lot of cash with a limited amount of businesses that are generating free cash flow at this time. It is run by the best management team in the country. They are patient and have done this in the past. This is going to be the company that picks up good things when things blow up. They are planting a lot of seeds that one day will pay off in dividends.

Basically a company that acquires pharmaceutical products, typically from other large established companies. Ranks in the top 3^rd of his database. Earnings have been a bit challenged for the coming quarter. Most recently, sales were up 26% and earnings were up 54%. In the coming quarter,it is expected to have a step back, and earnings are expected to be $.03 versus $.08 last year. Earnings estimates have been shaved by 15%, and earnings for 2017 versus 2016 are literally unchanged at $.13 per share. Against a $10 stock price, that gives you and 82X PE multiple with low to no growth. There is a lot of competition and better opportunities in others.

You can’t argue with what Jonathan Goodman has done in his past. Probably the only pharmaceutical company in its category in the last year that has actually gone up. Has a ton of cash tucked away in the company and is waiting for some opportunity. Some of the acquisitions he has made along the way have been great. A very patient investor.

(Market Call Minute.) Great management team. Everybody loves this company. They have been executing and have been finding deals to do at a reasonable price. Probably good long term. Valuation is a little stretched though.

In most cases, this company attempts to acquire drugs from gigantic pharmacy companies. It ranks 480 in his database, and earnings have been revised upwards. Year-over-year sales grew 26%, and earnings grew at 54%.

Jonathan Goodman, former founder and CEO of Paladin labs, sold Paladin to Endo Therapeutics in the US. Endo has since come under a lot of pressure, and this company possibly has the opportunity to buy back the Canadian assets at a much cheaper price than they sold it. Just did a recent $10 equity raise. Knight has about $5 a share in cash, so it has a lot of firepower to be picking up distressed assets from the Valeants of the world, Endo, and possibly even Concordia. He likes this quite a bit here.

Doesn’t think this is an area where it is endangered by curtailment of drug prices by the US government. This is run by a very small core of extraordinary experienced people. They have mentioned that they are going to get some acquisitions done. (Analysts’ price target is $10.45.)

The past owner of Paladin Labs. About half the market cap is in cash right now, about $655 million. They are currently financing interesting pharmaceutical companies through high interest debt or buying equity in them. Generating pretty good return on most of these investments. You have to make a bit of a leap of faith in trusting management to take their cash and invest it and make good returns. He thinks they can. There are rumours they are considering buying the Paladin assets back, probably at a discount. He likes this. You have to be patient and give management time to execute.

(A Top Pick Oct 13/15. Up 20.09%.) About the only biotech company in Canada that is doing well. It has $600 million in cash. A long-term story, but if you have seen the biotech sector in the past year, $600 million in cash is a pretty good position to be in right now. Recently they have been giving loans to very tiny companies to finance working capital, and if the company doesn’t actually make it, they just fold the whole technology into Knight.

There is $6 in cash so your down side is very limited. The upside is that they make nicely accretive acquisitions.

One of the few pharmaceutical companies that has actually done well over this last year. He likes it. They have a whack load of cash of about $625 million which they are using to finance pharmaceutical companies, buying licenses, etc. You are really buying the management team.