June 27, 2019 - 1:32pm EST by
2019 2020
Price: 6.49 EPS 0.39 0
Shares Out. (in M): 14 P/E 16.7 0
Market Cap (in $M): 90 P/FCF 17.9 0
Net Debt (in $M): -23 EBIT 0 0
TEV (in $M): 67 TEV/EBIT B 0

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  • Strong Balance Sheet
  • Canada


Biosynet is a speciality pharma company which was previously written up by tim321 on 2-29-16.   Very little has changed with the story with the stock recently hitting 6.50 CAD vs. 6.25 back then as the company has ceased to be a growth company and now sits without a catalyst.   I am willing to be a patient investor, as I respect management, they will continue to sell their existing products, and they will continue to look for new ones to license.  In the meantime, the company will buy its own shares in a careful and measured way.  There is no obvious reason why it should go up anytime soon though, so for me I own it as part of a more diversified portfolio.

The stock has been under pressure lately due to two events:  1) international sales of the flagship product FeraMax hit a snag due to import permits from a distributor, though the company is working on this and has been optimistic that orders will be filled (Q2 and Q3 orders are 'filled'), and 2) the recent withdrawal (yesterday) of two cardio products to Health Canada which was largely supposed to be the growth driver in future years.  These are valid issues for disappointment based on the company's higher stock price but don't signify that the company's business is finished with finding and marketing new products, and the valuation no longer has any growth premium built in.

   Here is what I like:

*very strong BS.  Company has 23m in net cash/investments or $1.57 a share.   The company has stated a couple times they only need 15% of the available cash for the business.  The company has a lot of dry powder.

*high free cash flow.  On the EV of 70m the company generates 5.7m in TTM Ni+Da with minimum CapEx requirements

*buyback ongoing.   RX is very careful with cash and recently initiated a new buyback plan - 1.6m executed in Q1, with more no doubt being done today and into Q2

*stability of the FeraMax franchise.   FeraMax dominates the sales line (product sales not disclosed) and has generated reliable sales and profits - from 2014 to 2018 sales grew from 12.2 to 21.5 with EBITDA 4.3 to 7.4m, with product lines in total growing from 3 to 8.  Significantly, share count only grew from 14.50 to 14.583m.  

Here is what I don't like:

*there is no catalyst.   Nothing evident right now.  There are six products in the growth cycle (Fermax, Cathejell, FeraMax powder, RepaGyn, Aguettant System, and Cysview) with one unspecified (in terms of sales) woman's product set to launch.  I have no insights into future products, and some of them have not lived up to expectations or taken longer than expectation to yield results (Cysview).  This is a trust me Bubba capital allocation in terms of future choices.  

*no dividend - but given the way manages the company, I am perfectly comfortable with them handing the capital returns via buybacks when appropriate.   

That's it.  As noted, tim321's profile speaks to the CEO and he remains in place (15% holder).  In following the company for five years I've always found RX to be calm, deliberate, and non-promotional in their investment dealings with the public, and the BS is proof of the company's conservatism and the longer-term record a sure sign that they know how to make money.   Everybody deserves a mulligan, but the current price IMO suggests that growth is impaired.   Knight Ther. should buy these folks - this is much better group to associate with than Medison.


I do not hold a position with the issuer such as employment, directorship, or consultancy.
I and/or others I advise do not hold a material investment in the issuer's securities.


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