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Medicure

Remi
Thu, 31 Mar 2016 14:34:04 GMT

Medicure (MPH.V or MCUJF) just released earnings turns out Q4 sales were actually closer to 4x Q3 sales. There was an influx of orders due to a supplier issue with their main competitor which led to 79 new US hospitals using their drug vs the usual 10. Looks like 90% of these hospitals now that they have had a taste of nicely priced effective drugs are interested in an ongoing relationship. However they overbought in Q4 so sales will be lighter in Q1, just 1.5x Q3. So no breakout this AM however the news is super bullish and provides an opportunity to buy (I got some more and in a way hope price can drop even further!). They are hiring salespeople like crazy (including adding another organization) and mention they expect sales to go up in future.... I'm also aware they opened a new building to expand.... companies don't do this unless they see strong growth. They are also working on this new transdermal application of their main drug - pretty much you slap it on a body and it's aspirin with a short half-life meaning you can use it before your surgery and don't have to be in the hospital for the week prior. They have the right to purchase Apicore next year, a generic drug company, and that company's growth someone mentioned was 61% in the past year. From what I understand with US politics, politicians on both side of the House want more cheap drugs coming in. Their corporate presentation here: http://www.medicure.com/upload/pdfs/Investor_Presentation_q4_2015.pdf It shows there is possibly a few 100 million dollars market share to gain with their main drug (Medicure sales in 2015 were 22 million which was up 2.6x the sales from 2014) . It also shows how hospitals get 50-70% savings with their drug. Risk/Reward chart: [Medicure](//muut.com/u/pttresearch/s1/:pttresearch:hJWH:medicure.gif.jpg)

Thomas
Fri, 01 Apr 2016 16:34:23 GMT

Thanks for the information Remi. I see MCUJF trades very low volume,only 5500 shares daily average and MPH.V near 50000 daily. The stock looks interesting,would this be a spec size position for you or a bit more? As always Thanks for any reply.

Remi
Fri, 01 Apr 2016 23:57:48 GMT

Similar to Intermap it trades with higher volume on the Canadian side, but still not super high. You have to understand though that as a company gains in market cap and succeeds, the volume goes up so in a way you want to get into a company before it gets too popular. If I lived in the US, I would maybe consider a brokerage that trades Canadian equities - I thought I saw Interactive Brokers offers this for Americans but you'd have to research that. I currently have close to a 10% position. I mean its a company that makes great cash flow already and at this point has transformed itself to have a strong financial position. It has been rapidly growing sales, has several catalysts and very attractive valuation characteristics for what I expect in the next year or two - so both a value and a growth play. I will be probably adding more too if it hits the bottom line of the chart I posted. I know this company well and it is my favorite holding at the moment in terms of expectations I have in the next year or two, so I consider it Core. I have dumped my holdings in other companies like GLUU on the other hand since there much more faith required at this point so that I would consider those more the example of a spec position (I also categorize Intermap this way but I have kept those shares).

Stephen
Sat, 02 Apr 2016 16:04:03 GMT

I'm quite ignorant in this whole area, but curious... Looking around a bit, this seems quite positive re: switch from competitor integrillin ( Eptifibatide) to Medicure's Aggrastat (tirofiban). http://www.cathlabdigest.com/article/Switching-Eptifibatide-Tirofiban-Use-ACS-Reducing-Cost-While-Maintaining-Quality-Care But it seems hard to predict how the generic Integrillins that just came to market in December will price their products going forward... sounds from the CC that they came in about 13% below the brand name, which means quite a lot more expensive than Aggrastat. But it seems plausibly the case that at least one of them may get considerably more aggressive in pricing going forward if necessary to gain substantial market share? Medicure is paying something like 8% royalty on each additional dollar of gross sales until 2023? Is there much reason to suppose that their overall costs are much lower for Aggrastat than the cost for competitors producing and sell ing generic Integrillins? They have an option to buy Apicore. But at what price? Is there reason for confidence that it's an excellent price from Medicure's perspective? Thanks, Remi!

Remi
Wed, 06 Apr 2016 20:40:48 GMT

Hi Stephen, been a bit busy, just welcomed a little boy into our family on Sunday night :) Curiosity is the first step to finding a great investment (and the first step in finding the bad ones to discard too ;)) Although I do have several health care practitioners among family and friends (including previous hospital board member with my grandfather), I feel like this is another product company that can be analyzed without an enormous amount of technical expertise but rather some common sense, research and general industry knowledge. I would suggest you take a look at this terrific thorough research by M Partners, it will probably give you more answers on many of the topics you have been contemplating: https://www.hvst.com/public-pages/m-partners/posts/58854-medicure-inc-unique-specialty-pharma-with-41-upside-opportunity Regarding the pricing you have mentioned, it states: "The recently introduced generic Integrilin is priced approximately 13% less than brand Integrilin. With the introduction of additional generics over time, we expect the price for generic Integrili n to drop further, and closer to the Aggrastat price, but we believe that Aggrastat will continue to maintain a substantial price gap in the near term" I also found some stories like the below of hospitals making the switch to Medicure's Aggrastat drug: http://www.cathlabdigest.com/article/Switching-Eptifibatide-Tirofiban-Use-ACS-Reducing-Cost-While-Maintaining-Quality-Care From what I can tell, hospitals are generally risk averse and don't like switching between drugs due to the transitional costs and headaches. What Medicure is doing now is gaining market share because it's drug is similar in efficacy but much cheaper. Part of the reason why it's cheaper is that much of their costs are in Canadian dollar yet their revenue is in US dollars. Other than this, I do not know any structural dynamics regarding manufacturing or other. I do see plenty of reports that many US pharmaceuticals seem to be raising prices of drugs in the past several years - not sure if this is to pay for research for new drugs, to please shareholders, etc. My conclusion though is that once a hospital does make the transition to Aggrastat, they will be pleased like the others and never look back. That is why the next year or two is critical for Medicure to get that market share - and after that, it doesn't matter as much if other find a way to reduce the prices some more since they will already be dead ducks. Many of Medicure's customers that have made the switch are the large US hospitals and they are saving upwards of half a million a year. The smaller ones will eventually follow their lead. In Europe and globally, Aggrastat is the most popular drug of its kind and it was approved earlier there for high dose - it makes sense that the same thing will happen in US. And then there's some increasing differentiation on top of the price. In the M Partners report it says "Compared to its competitors, Aggrastat has equal efficacy and safety (Am Heart J. Jan 2014) but has some convenience advantages including being easier to store (does not ned to be refrigerated, others do) and does (only needs one bag of drug per patient whereas the others need multiple vials for the comparable dose)." On top of this, if Aggrastat gets the FDA approval in a few months of use in STEMI applications (more severe coronary, severe blockages) they will have something that none of the other competitors have at all - the approval seems likely since it was already approved in Europe, so again the US is just late to the party.

Remi
Wed, 06 Apr 2016 21:10:27 GMT

The super wilcard and catalyst is Apicore though. It's the maker of generic drugs with facility in India and one in New Jersey. Apicore's revenues: 2012: US$5 million 2013: US$10.3 million 2014: US $14.3 million (US $1 million EBITDA) 2015: US$23 million (US$3.5 million in EBITDA) Now Medicure has a 5% stake in this company and an option to purchase them at a fixed price, this option expires in mid 2017. They did the deal in mid 2014 and at that time Apicore was valued at 22.5 million. Now it will be 2.5 years later and their revenue will have doubled and they are making money. Medicure and Apicore are working on a new generic drug for mid 2018 so with that relationship, it's near certain Medicure will be looking to acquire them. And generic drugs are booming - patents on several blockbuster drugs are expiring and the US is looking for cheap alternatives. The other possibility I suppose is that Medicure itself would be acquired - they have 100 million i n tax loss carry and the chairman who owns 17% of the company has already founded and sold 2 other companies in the past.

Thomas
Wed, 06 Apr 2016 21:11:49 GMT

Congratulations to you and yours Remi, let the good time begin:).

Thomas
Wed, 06 Apr 2016 21:16:47 GMT

Meant to say let the good times begin and thanks for the added info on Medicure as well.

Remi
Wed, 06 Apr 2016 23:01:31 GMT

Thanks Thomas and with that I got to go back to help with the little guy... it's amazing how much time disappears when you have a newborn to watch and worry about