Stifel Canada analyst Justin Keywood has raised his target price on specialty pharma company HLS Therapeutics (HLS Therapeutics Stock Quote, Chart, News TSX:HLS) based on a new de-risking event for the stock, namely, the Canadian launch of cardiovascular drug Vascepa.
In an update to clients on Tuesday, Keywood reasserted his “Buy” rating while upping his price target from $33.00 to $35.00, the third target raise for the stock this month by Keywood.
Toronto-based HLS announced on December 31, 2019, that Vascepa had been approved by Health Canada, while this Tuesday the company announced that Vescepa will become available to Canadians on or about February 18.
“As a result of its approval, Vascepa is now the first and only drug in Canada indicated to reduce persistent residual cardiovascular risk in patients stabilized on a statin, with elevated triglycerides and other risk factors for cardiovascular disease,” HLS said in a press release.
HLS’ share price has soared in recent months on the back of the news about Vascepa. In his update, Keywood noted that the drug will be initially supported in Canada with 22 sales reps in addition to eight other field-based roles. The list pricing HLS has set at C$294 per month per patient, which is slightly above Keywood’s estimate and a “positive and de-risking event” in the analyst’s eyes.
“As a result, we believe that about 10 per cent of additional value could be implied in our Vascepa scenarios, suggesting $18-$75+/share in incremental value to a base business of primarily Clozaril at $10/share. We also see the announcement as demonstrating continued solid execution by management,” wrote Keywood.
The analyst thinks HLS will now in-license and commercialize other similar assets “with a more robust and solid foundational platform in place with strong synergy implications,” pointing to HLS recent filing for PERSERIS and expected filing for Trinommia.
On Vascepa and its catalytic REDUCE-IT trial, Keywood says his confidence in the value of Vascepa for HLS continues to increase after speaking with over ten contacts in the past year including doctors, cardiovascular experts, consultants and major pharma companies. The analyst puts the value of Vascepa at up to $75.00 per share.
“The REDUCE-IT trial showed robust and consistent results including 26 per cent reduction in death, heart attack and stroke. The results were also not significantly influenced by levels of triglycerides between 135 to 499 mg/dl or patients with and without diabetes, illustrating that healthy patients can still benefit from Vascepa. Several of our contacts described the breakthrough nature of this trial, comparing Vascepa to statin. Vascepa not only highlights significant upside in the stock but also on HLS’ ability to successfully execute on value creating transactions, which we think can be repeated,” Keywood wrote.
The analyst thinks HLS will generate fiscal 2020 revenue and EBITDA of $65.2 million and $29.0 million, respectively, and fiscal 2021 revenue and EBITDA of $75.7 million and $39.6 million, respectively.
Keywood’s $35.00 target, which is equivalent to a value of $25.00 per share for Vascepa along with $10.00 per share for Clozaril, represented a projected 12-month return of 53 per cent at the time of publication.
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