Howard Shainker Bullish on Nordion

Updated on

Howard Shainker Bullish on Nordion

Howard Shainker is the third speaker at the Harbor investment Conference. Shainker was a former analyst at Third Point. He was big player in going short subprime in 2007 and then long in 2009, which was a great call.

Shainker pitched Nordion Inc (NYSE:NDZ) (TSE:NDZ) a company with $450 million market cap. It has sterilization of medical devices segment, liver cancer therapy, and medical isotopses. Supply constraints are jepordizing the future.

ACEL and Nordion Inc (NYSE:NDZ) (TSE:NDZ) spent $350 million on a reactor. They went to mediation and NDZ won. The sell side is getting very excited about the announcement, but then around five months ago the stock tanked when mediation failed second time went down 35% and the sell side got all nervous.

The sterilization division makes lot of money. They sell products such as Colbot which decay every day. Therefore, demand continues on a constant basis and this business is a duopoly.The growth has been pretty stable for the company. The stock is trading at about $7.35 and sterilization alone is worth $6-%8 based on comp EV/EBITDA.

Another device is TheraSphere used to treat liver cancer. This product has a rare thing called FDA exemption, where the product does not hurt people but could benefit them. This is a six million dollar market.

Nordon is a smaller version of Sirtex Medical Limited (ASX:SRX), with regards to these products but Sirtex does not have the exemption. Sirtex spends more money, and Nordion Inc(USA) (NYSE:NDZ) has been very distracted by litigation.

Shainker thinks this divison which is worth $3 a share based on 3X sales multiple could be sold off. Sirtex trades at 6x sales by comparission.

If you add all divisons and use sum of parts the stock is worth $10.80 on conservative basis.

Even if medical isotopes disappears, there is still nice amount of cash flow from the business worth about $1 a share.

Even if the company losses the lawduit they have some DTA worth $0.5 billion.

The company has hired Jefferies Group, Inc. (NYSE:JEF) to advise, and there are many sensible buyers for Therasphere.

Leave a Comment