Tuesday, Fennec Pharmaceuticals Inc. (NASDAQ:FENC) saw its price target increased to $18.00 from $17.00, while its stock rating remains a Buy according to a Craig-Hallum analyst. The adjustment comes in the wake of Fennec's recent announcement regarding the out-licensing of the EU commercial rights for Pedmarqsi, a deal made in partnership with Norgine.
The analyst from Craig-Hallum noted that the agreement with Norgine is expected to exceed investor expectations, and it certainly surpassed their own. The deal is perceived to add significant value to the EU rights of Pedmarqsi. However, the analyst highlighted that the majority of the business's value, approximately 80%, is still derived from the US market. In the US, Fennec retains direct control over the marketing of Pedmark, which commands a price point nearly double that of Europe.
The partnership is also significant in light of the National Comprehensive Cancer Network (NCCN) guidelines, which now recommend Pedmark for use in both young adults and pediatric patients. This recommendation opens up a larger market opportunity in the US, an advantage not mirrored in the European Union.
Financially, the deal with Norgine is set to contribute over $200 million to Fennec's financials through upfront payments, milestones, and royalties. This inflow is considered substantial, especially when juxtaposed with Fennec's current market capitalization of around $300 million. The Craig-Hallum analyst believes that the market has not fully recognized the intrinsic value of Pedmark and Fennec, thus presenting a potential opportunity following the Norgine deal.
In conclusion, the analyst expressed confidence that the out-licensing arrangement offers external validation for Pedmark's value from a strategic perspective. This validation is anticipated to help bridge the valuation gap. The raised price target is attributed to the expected positive impact on Fennec's balance sheet and the deal's favorable terms, which surpassed initial projections.
InvestingPro Insights
In light of Fennec Pharmaceuticals Inc.'s (NASDAQ:FENC) recent developments and the updated analyst ratings, insights from InvestingPro provide additional context for investors. With a market capitalization of approximately $295.27 million USD, Fennec's financial standing is solidified by a gross profit margin of nearly 94.94% over the last twelve months as of Q3 2023. This impressive margin suggests efficient management and a strong pricing strategy for their products.
InvestingPro Tips indicate that analysts expect sales growth in the current year, which aligns with the positive outlook from the Craig-Hallum analyst following the Norgine deal. Additionally, the company's liquid assets exceed its short-term obligations, providing financial stability and the potential for sustained operations and growth. However, it's worth noting that analysts do not anticipate the company will be profitable this year, and the stock's Relative Strength Index (RSI) suggests it is currently in overbought territory.
Investors may also be interested in the significant return over the last week, with a 13.89% price total return, and an even more substantial 22.86% return over the last month. This performance could be indicative of market optimism surrounding the recent EU commercial rights out-licensing deal.
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