Merus Labs International (MSL.TO)

Had a pretty parabolic move mid-2014, and then went right back down again. This was followed by a little bit of a base, and then a big move up and took out the 2014 high. Technically that is a fairly good sign. It looks good.

Doesn’t follow this one well, but recent analysts reports look pretty positive. Recently made an acquisition. He has a good feeling about this and feels it has some room to run.

This pre-raised money for acquisitions and then made a small acquisition recently, so has EBITDA of about 9.5 times Concordia’s (CXR-T) 12 and Valeant’s (VRX-T) high teens. It appears to be the new management team that is well liked with lots of targets for them. He sees $4 a year from now.

Still likes this and thinks there is a lot of upside to come. However, there is some risk in the near to medium term. They, along with everybody else, who manufactures and sells drugs in Germany, are subject to a price cap review, and there is likely going to be a cap put on the price of their key drug Enablex. They are diversifying away from this, but there is some near-term risk to the stock. In a 2-3 year timeframe, he thinks you are going to see 2 to 3 times on the stock. Definitely a buy for the long-term, but pick your spots. Loves the new CEO.

Thinks new management has its head switched on and the valuation is attractive. Hasn’t backed up the truck, but has started a position. Likes what he sees so far.

Delivery, rather than creation of, drugs and the buying of orphaned drugs. Stocks that are going up tend to keep going up. They had a management change and the stock had a good run. You might want to take some profits and then buy back on a pullback.

Has a drug in Germany which is coming off patent which is a concern. He would like to see this settled before he took a full weight position. Stock had a huge jump today because of rumours of settlement in Germany as far as the pricing goes.

(Top Pick Apr 21/14, Up 73.91%) Still one of his largest positions. They settled a patent suit. It is a bit of a roll up story. They are likely to do more acquisitions. Thinks the stock will go materially higher.

CRH Medical (CRH-T) or Merus Labs (MSL-T)? These are not really comparable to one another. This one is fairly cheap compared to others. They have some issues with pricing with one of their drugs in Germany, and there is concern that the cash flow comes way off from the level it is. He would like to see more certainty.

(A Top Pick Dec 27/13. Up 30.56%.) He still likes this a lot. Recently acquired Sintrom, but more importantly the former CEO left, and he thinks the new CEO is basically a rock star in the industry. Was CEO of Teva Canada, and grew it by 5 times over his tenure. He has an EBITDA target for this company of over $100 million in 2018. Thinks the stock will perform alongside. This stock trades at a big discount to its peers. (Says it could have been a Top Pick again tonight.) His 1-year target is $3. One of the misunderstood things is that when drugs come off the patent in Europe, they typically don’t fall in revenues by more than 50%, because it is a very highly fragmented market. Some investors are modelling in a typical North American patent cliff of 80%-90%, which is just wrong.

This one has had a few hiccups. Believes the money they have raised has been redeployed already. Signed a couple of deals and looked like they might sign a couple of others, but then the CEO resigned and the stock took a big whack. Time will tell in regards to what deals they will be able to sign. There are better players right now.

They typically acquire less active smaller drugs, which are usually spun out by larger companies. The company is doing quite well.

(Top Pick Sept 30/13, Up 5.71%) The new CEO is better than the prior. They have expanded the drug base to 3 in the portfolio. The new CEO will be much more aggressive at growing the portfolio of drugs from 3 to 6 next year to 12 the following year. It is ridiculously cheap.Thinks you will see a double in the next while.

Looking to make acquisitions. They are all competing on acquisitions.

(A Top Pick July 25/13. Up 88.75%.) Recently, did an equity deal, and got access to about $80 million in debt. Also, did a strange deal with Dasha Metals (?) which gives them access to another $10 million. Have approximately $170 million of firepower to make a drug acquisition. Almost made this a Top Pick again as he thinks the stock is going a lot higher.