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iA Capital reports on Valeo Pharma’s record quarter

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iA Capital Markets analyst Chelsea Stellick sees value in Valeo Pharma (Valeo Pharma Stock Quote, Chart, News, Analysts, Financials CSE:VPH), reiterating her “Buy” rating and target price of $1.90/share for a potential return of 164 per cent in an update to clients on Thursday.

Founded in 2003 and based in Montreal, Valeo Pharma Inc. specializes in commercializing branded pharmaceutical products in the Canadian market, featuring a robust portfolio of 11 commercial-stage products across respiratory, hospital, neurology, oncology, and other product sectors.

Stellick’s latest analysis comes after Valeo Pharma released its third quarter financial results, which Stellick noted to be impressive.

The results were headlined by revenue of $5.7 million in the quarter, representing 114 per cent sequential growth and a 280 per cent year-over-year increase, as well as a nine-month record revenue report of $10.2 million to mark a 94 per cent increase.

The company also posted a record gross profit of $2.2 million in the quarter compared to $100,000 in the same quarter of 2020.

Meanwhile, the company’s adjusted EBITDA came in at a loss of $800,000, just below the $700,000 loss it experienced in the same quarter of 2020.

From a financing standpoint, Stellick notes that the company has $9 million in cash on hand, though $3.3 million in bridge financing comes due in January. However, the company also has 27 million outstanding warrants at $1.06/share, which Stellick notes could represent a significant influx of capital once the company’s stock price rises again.

Stellick notes that the company was the subject of bank fraud with one of its major suppliers earlier this year, resulting in a non-recurring $900,000 loss to be reflected across the third and fourth quarters.

Stellick attributes the revenue spike to increased sales of Redesca, an injectable low molecular weight heparin biosimilar used primarily to treat and prevent deep vein thrombosis and pulmonary embolism. 

Redesca’s sales efforts were bolstered by the announcement in July that it is now covered for public reimbursement in seven provinces and territories across Canada in addition to several governmental agencies and 70 per cent of privately insured lives in Canada for private payer health plans reimbursement.

“Redesca is the crown jewel of the VPH portfolio,” Stellick said. “We expect Redesca to continue to support strong growth in the coming quarters as it grows into its >$30 million annual peak sales projection.”

Meanwhile, Stellick also expects gradual market penetration for Enerzair and Atectura, the company’s entries into the asthma market, based on strong early demand for samples after their initial commercial launch in June.

“The Q3 commercial launches of Redesca, Enerzair and Atectura, three products that are transformative for Valeo, contributed to our record third quarter results. Valeo is rapidly evolving into a leading Canadian pharmaceutical company with strong management and an extensive commercial infrastructure. Our innovative products and pipeline point to robust revenue growth for the coming years,” said Steve Saviuk, CEO of Valeo Pharma in the company’s September 22 press release. “Redesca has rapidly become our best selling product while initial healthcare professional interest in Enerzair and Atectura, our two newly launched asthma therapies, has been very strong and supports our view that these therapies will be important revenue drivers.”

Stellick believes Valeo Pharma will become a profitable operation in 2022, buoyed by revenue of $44 million to mark a potential 159 per cent year-over-year increase, while her 2023 projection of $90 million would represent a 105 per cent potential year-over-year increase.

Meanwhile, Stellick projects EBITDA to turn positive in 2023 with a projection of $23.5 million for a margin of 26.1 per cent after a projected loss of $400,000 in 2022, followed by a jump to a projected $46.5 million in 2024 for a 97.9 per cent potential year-over-year increase and a margin of 34.7 per cent.

Net income is also projected to go positive in 2023 at $17 million, according to Stellick’s estimates, with that figure projected to double to $34 million in 2024.

2023 is also when Stellick projects the company’s net cash flow to turn positive at $15.8 million after a projected loss of $3.2 million in 2022, followed by another projected jump to $32.2 million in 2024.

Overall, Stellick believes the company is in a positive position moving forward.

“Although record gross profit of $2.2 million was fully offset by higher expenses to support the expanded portfolio, Q3/F21 was clearly a strong quarter that makes clear VPH’s path to profitability on a dramatically expanding revenue base,” Stellick said. “The growth of Redesca was front and centre, and we look for additional strong quarters of Redesca sales growth through F2022.”

Overall, Valeo Pharma’s stock price is down 38.2 per cent for the year to date, with its high point coming on January 25, when it reached $1.46/share.

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About The Author /

Geordie Carragher is a staff writer for Cantech Letter

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