Buy HLS Therapeutics stock for big returns, Clarus Securities says

Investors shouldn’t worry about the US patent decision when it comes to HLS Therapeutics (HLS Therapeutics Stock Quote, Chart, News TSX:HLS). That’s the conclusion from Clarus Securities analyst Noel Atkinson who updated clients on Monday, saying Amarin’s woes south of the border won’t be repeated for HLS in Canada.

Earlier this month, biopharma company Amarin received a blow when the US Court of Appeals upheld a lower court ruling from March 2020 against patent protection concerning the company’s fatty acid pill Vascepa and in favour of two companies with generic versions. The result seems to have caused further strife to not only Amarin’s share price but also to HLS, holder of the Canadian rights to Vascepa, and whose stock is down about 45 per cent year-to-date.

HLS responded to the recent events in a September 3 press release, arguing that the US judgment does not affect Vascepa’s chances in Canada, as not only is Vascepa’s status outside of the US not affected by the litigation and that no litigation is pending in Canada on the drug but that Vascepa was added to Health Canada’s Register of Innovative Drugs in January 2020 and has data protection until December 2027.

“As with the U.S. district court ruling earlier this year in March, the appeals court ruling in the U.S. does not affect the Canadian business for VASCEPA or our growth outlook for the product, which we believe could achieve a peak-year revenue run-rate of $275-325 million,” said HLS CEO and president Gilbert Godin in the press release. “Since our launch earlier this year, we continue to move forward on our plan to bring this new and unique treatment option to the many Canadians who suffer from cardiovascular disease,
which remains the world's number one killer.”

Atkinson echoed HLS’ claims in his new report, saying he expects Vascepa to become a blockbuster drug in Canada well before HLS’ patent protection runs out in 2027.

“Amarin’s Vascepa patent litigation woes in the U.S. market appear to have weighed on investor sentiment for HLS as well, even though HLS has strong IP protection against generic competition to Vascepa in Canada through at least 2027. Consequently, we see HLS’s current stock price as a highly attractive entry point for investors,” Atkinson said.

“Vascepa was on private health plans covering about 40 per cent of potential covered
lives as of August, up from 20 per cent in May. We expect further inclusions to private
formularies in coming months and then addition to public formularies in 2021 and early
2022,” Atkinson said.

“We continue to expect average net price of $200/month and our peak sales estimate assumes only about 8-per-cent penetration of the target patient population –so there could be a lot of upside potential to our forecast,” he said. Atkinson said the hockey stick ramp in Vascepa’s sales growth should start in early 2021, although there should be early evidence in the second half of 2020.

With the update, Atkinson maintained his “Buy” rating and $31.00 target, which at press time represented a projected 12-month return of 129 per cent. By the numbers, Atkinson thinks HLS will generate fiscal 2020 revenue and adjusted EBITDA of $52.7 million and $19.3 million, respectively, and fiscal 2021 revenue and adjusted EBITDA of $81.0 million and $25.0 million, respectively.