Knight Therapeutics (GUD.TO)

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.

They are not going to be taken over. They are sitting on a good amount of cash. They may buy some good assets on the cheap. This is driving the stock upwards. It is more of a mutual find on the health care industry. It is for long term investors.

A Canadian health care holding company run by Jonathan Goodman, who formerly ran Paladin, a Canadian success story. It is a little expensive here. A holding company sitting on a lot of cash, and there is a lot of goodwill built into what people think he is going to do with the money. He would prefer to wait to see where he invests. (See Top Picks.)

Not a lot to say on this. It has production, and it has tremendous links through the Pharma world. It will secure more opportunities. It is in no way an endangered company.

(Market Call Minute) Excellent for the long term. It is doing nicely again out of the trough.

While this has gone down in the healthcare bear market, it hasn’t gone down as much as others. The reason is that Jonathan Goodman took his previous company Paladin Labs to $145, and it took 19 years. This is going to be a very long-term hold. Mr. Goodman has amazing connections into the pharmaceutical industry for acquiring and participating in drugs. Has also long participated in financing for others.

(Top Pick Jan 6/15, Up 9.89%) Stay with it. The chart looks good. It is trying to break out of a triangle. Stay with it.