The United States District Court for ruling in favour of the generic companies versus Amarin and its heart drug Vascepa has no bearing on HLS Therapeutics, (HLS Therapeutics, Stock Quote, Chart, News TSX:HLS) says Stifel Canada analyst Justin Keywood.
Shares of Dublin-based Amarin fell after the District Court ruled in favour of Hikma Pharmaceuticals and Dr. Reddy’s Laboratories, both of whom want to make and sell generic versions of Vascepa.
“Amarin strongly disagrees with the ruling and will vigorously pursue all available remedies, including an appeal of the Court’s decision” to prevent launch of generic versions of Vascepa in the U.S., said Amarin CEO John Thero.
Here in Canada, where HLS Therapeutics holds the rights to the drug, its CEO Greg Gubitz said the ruling does not cross the border.
“This court ruling in the U.S. does not affect the Canadian business for Vascepa or our growth outlook for the product,” he said. “Since our launch several weeks ago, we continue to move forward on our plan to bring a new and unique treatment option to the many Canadians who suffer from cardiovascular disease, the world’s No. 1 killer.”
Keywood agreed with Gubitz.
“AMRN received a negative ruling last night for a lengthy patent litigation claim by two generic companiesfor Vascepa in the U.S.,” the analyst explained. “We do not see the ruling impacting HLS and Vascepa in Canada, where data protection has already been granted by Health Canada, preventing generic entry or variations of the drug for eight years. Further, HLS has ~15 issued or pending Canadian patents for Vascepa that could extend the exclusivity period until 2039 and are not impacted by the U.S. ruling. AMRN highlighted this fact in its press release, along with mentioning a vigorous appeals process that will be launched, including seeking an injunction on potential generic entry.
AMRN also noted that an ANDA for Vascepa has not been approved by the FDA, required for generics. This could suggest a lengthy process of 1-2 years in the U.S. prior to generic entry if appeals fail but still not impactful to Vascepa in Canada. Our estimated range of values for Vascepa in Canada of $18-$75/share conservatively assumes only eight years of exclusivity granted by Health Canada and we maintain our value estimates. Combined, we reinforce our conviction in HLS, despite the U.S. headline risk.”
In a research update to clients today, Keywood maintained his “Buy” rating and one-year price target of $35.00 on HLS Therapeutics, a figure that implied a return of 85 per cent at the time of publication.
Keywood thinks HLS will post EBITDA of (All figures USD) $25.8-million on revenue of $63.9-million in fiscal 2020. He expects those numbers will imprive to EBITDA of $39.4-million on a topline of $75.4-million the following year.
“We maintain a $35.00 target based on 21x 2021 EBITDA. Our $35 target is equivalent to $25.00/share for Vascepa in addition to $10.00 for Clozaril, supporting our methodology.We see HLS as a recession-resistant business with a solid foundational platform with positive FCF. HLS is launching an important
heart health drug for at-risk patients and our conviction remains high,” the analyst concluded.