HLS Therapeutics has a winner in Vascepa, Stifel says

On the back of a US FDA label expansion for Vascepa, Canadian specialty pharma company HLS Therapeutics (HLS Therapeutics Stock Quote, Chart, News TSX:HLS) got a target price raise from Stifel Canada analyst Justin Keywood, who in a client update on Monday reaffirmed his “Buy” recommendation with the new target of $30.00 (was $26.00).

On Friday, the FDA approved Vascepa for an expanded and broad label, making it now “the first and only drug approved by the FDA as an adjunct to maximally tolerated statin therapy to reduce the risk of myocardial infarction, stroke, coronary revascularization, and unstable angina requiring hospitalization in adult patients with elevated triglyceride levels and established cardiovascular disease or diabetes mellitus and two or more additional risk factors for cardiovascular disease,” according to a press release by Amarin, Vascepa’s drug developer.

As a result of the event, Amarin says its target market for Vascepa has increased tenfold to about 30 million people in the US, with the company also lifting its 2019 sales guidance for Vascepa from US$400 million at the midpoint to between US$410 and US$425 million and now guiding for 2020 revenue of between US$650 million and US$700 million.

Keywood said the event offers a significant risk reduction for HLS, which has the Canadian rights to Vascepa, paying $5 million up front for the drug. Currently, Vascepa is under an expedited review with Health Canada. (All figures in Canadian dollars unless where noted otherwise.)

“We estimate that Vascepa could be a ~$300-million drug in Canada at peak value, implying an incremental $25 per share to a $10 per share base business of primarily Clozaril or ~$35 in total,” Keywood wrote.

“Our blue-sky scenario points to a value for Vascepa at around $75 per share based on greater market penetration rates. We also note the unique aspect of AMRN ramping up sales and marketing efforts of Vascepa in the US that is anticipated to coincide with the launch in Canada, leading to spillover benefits. Vascepa validates HLS’ ability to create shareholder value as well that we believe can be repeated,” he wrote.

Keywood said his confidence in the value of Vascepa continues to increase, with the analyst having attended the American Heart Association Scientific Session in Chicago on November 10, 2018, where the secondary end point of the drug’s REDUCE-IT trial were presented and having spoken about the drug with over ten contacts during the past year including doctors, cardiovascular experts, consultants and major Pharma companies.

“Our confidence in the value of Vascepa for HLS continues to increase, which we value to be worth up to $75.00 per share,” Keywood said. “Several of our contacts described the breakthrough nature of this trial, comparing Vascepa to statin.”

Looking ahead, Keywood thinks that Health Canada’s review is expected to generate a response around January 1, 2020, but could be sooner due to the FDA approval. The analyst estimates a Canadian launch in early 2020, with HLS building out a sales force of up to 75 reps. Keywood said that there should be some spillover benefits to Amarin’s marketing in the US.

“We find the situation to be very unique and possibly one of a kind that could lead to above average exposure for Vascepa, leading to higher sales estimates. Our near-term forecasts reflect very modest contributions for Vascepa that are anticipated to peak in sales around year four and we will look to refine these forecasts as milestones are achieved,” Keywood wrote.

At press time, Keywood’s new $30.00 target represented a projected 12-month return of 62 per cent.