Rising Latin America Demand Will Expand Specialty Pharma Reach

Key Takeaways

• Expanding specialty pharma portfolio and successful product launches drive growth, margin improvements, and geographic diversification, especially in emerging Latin American markets.
  
• Strong financial position and M&A strategy provide capital flexibility, supporting ongoing innovation, higher pricing power, and resilient profit margins.
  
• Heavy dependence on external partnerships and limited R&D heightens exposure to regional risks, cost pressures, and industry headwinds, threatening long-term growth and operational stability.

Catalysts

Focuses on acquiring, in-licensing, out-licensing, marketing, and commercializing prescription pharmaceutical products in Canada and Latin America.

• Strong organic revenue growth (15% YoY on a constant currency basis) and record-high adjusted revenues indicate accelerating demand for Knight's specialty pharma portfolio, benefiting from the rising middle class and increased healthcare spending in Latin America-directly supporting top-line growth and expanded addressable markets.
  
• Recent portfolio expansions via the Paladin and Sumitomo transactions have added 50+ products, including multiple early launch assets and oncology products, positioning the company for sustained future revenue growth, margin improvement, and geographic diversification.
  
• Knight's ability to secure regulatory approvals and product launches across Canada and Latin America (such as MINJUVI, ONICIT, IMVEXXY, and BIJUVA) leverages ongoing expansion of healthcare access in emerging markets, setting up incremental net earnings as public insurance coverage improves and patient uptake increases.
  
• Robust balance sheet, strong cash flows, and expanded debt facilities provide capital flexibility, enabling continued M&A activity and future share buybacks, further enhancing earnings per share and shareholder returns over the long term.
  
• Industry innovation and Knight's strategic focus on niche and specialty pharmaceuticals with limited competition support higher pricing power and resilient profit margins, pointing to further EBITDA and net margin expansion as new products mature and scale.

Knight Therapeutics Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Knight Therapeutics's revenue will grow by 9.2% annually over the next 3 years.
• Analysts assume that profit margins will increase from 0.1% today to 5.1% in 3 years time.
• Analysts expect earnings to reach CA$25.7 million (and earnings per share of CA$0.22) by about August 2028, up from CA$383.0 thousand today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 34.4x on those 2028 earnings, down from 1626.2x today. This future PE is greater than the current PE for the CA Pharmaceuticals industry at 22.7x.
• Analysts expect the number of shares outstanding to decline by 1.54% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 5.97%, as per the Simply Wall St company report.

Knight Therapeutics Future Earnings Per Share Growth

Risks

• Heavy reliance on in-licensing agreements and acquisitions (e.g., Paladin, Sumitomo, Helsinn, Incyte) increases vulnerability to losing or failing to secure key partnerships, which could limit new product flow and pipeline growth, directly impacting long-term revenue visibility and future earnings.
  
• Ongoing geographic concentration in Canada and Latin America, with significant exposure to Argentina, Brazil, and Mexico, increases Knight's susceptibility to regional regulatory changes, economic instability, currency devaluation, and hyperinflation risks, resulting in unpredictable net margins and possible revenue volatility.
  
• Limited internal R&D and absence of breakthrough proprietary drugs means Knight's differentiation and margin expansion are dependent on external innovation rather than internal development, which can constrain long-term earnings growth compared to peers with robust innovation pipelines.
  
• Shrinking gross margin percentage (Q2 2025: 46% vs. 48% prior year) and higher operating expenses (up 27% YoY) due to product mix, severance, and prelaunch costs, indicate rising cost pressures and lagging operational efficiency, threatening future net margins and bottom-line growth if not well managed.
  
• Industry-wide risks, such as increased scrutiny on drug pricing, accelerated generic/biosimilar competition, and heightened regulatory barriers for new launches in key markets, pose threats to Knight's exclusive product revenues, market share, and could delay or reduce returns on new investments, impacting both revenue and profitability over the long term.

Valuation

• The analysts have a consensus price target of CA$7.8 for Knight Therapeutics based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of CA$10.0, and the most bearish reporting a price target of just CA$6.15.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be CA$500.9 million, earnings will come to CA$25.7 million, and it would be trading on a PE ratio of 34.4x, assuming you use a discount rate of 6.0%.
  
• Given the current share price of CA$6.25, the analyst price target of CA$7.8 is 19.9% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.