Noel Atkinson of Clarus Securities continues to be behind HLS Therapeutics (HLS Therapeutics Stock Quote, Chart, News, Analysts, Financials TSX:HLS), reiterating his “Buy” rating and target price of C$33.00/share for a 74.2 per cent projected return in an update to clients on Friday.
Toronto-based specialty pharma company HLS Therapeutics focuses on acquiring and commercializing late-stage development, commercial-stage promoted and established pharmaceutical products for the North American market.
Atkinson’s most recent update comes after HLS reported its third quarter financial results, which Atkinson noted to be in line with projections, along with better than expected sales for Vascepa, an FDA-approved drug intended to reduce cardiovascular risk among patients with elevated triglyceride levels as an add-on to a statin therapy like Lipitor from Pfizer.
The company’s results were headlined by revenue of $15.1 million in the quarter (all figures in US dollars except where noted otherwise) against the Clarus Securities forecast of $15.2 million, with Atkinson noting another good quarter for sales of Clozaril, a prescription medicine used to treat the symptoms of schizophrenia, in the U.S. with revenue of $4.2 million to beat the Clarus estimate of $3.9 million, though the growth was offset by a drop in the Canadian market over the summer, with the $6.9 million report coming in below Atkinson’s projection of $7.6 million.
Meanwhile, HLS produced a beat on its EBITDA report, with its $6.9 million figure coming in ahead of the analyst’s projection of $6.3 million.
HLS reported 23 per cent sequential patient growth for Vascepa and a 30 per cent growth in the subscriber base despite a quiet summer with doctors and patients on vacation. The company also launched a new sales initiative through Pfizer to market Vascepa toward 7,500 Canadian doctors with high-volume practices toward the end of the quarter, which should produce increased volumes in the quarters to come, according to Atkinson.
“We continue to make important operational progress with Vascepa despite the impact of the COVID-19 delta variant, which has slowed market re-opening and kept in-person patient-physician interactions well below pre-pandemic norms,” said Gilbert Godin, CEO of HLS in the company’s November 4 press release.
“Encouragingly, the percentage of patient-physician visits that are taking place in-person is growing again and top health officials in Canada’s largest provincial jurisdiction are publicly urging physicians to increase their face-to-face interactions. We believe this call-to-action will serve as a catalyst for Vascepa as a recent study found that physicians are 50 per cent more comfortable initiating new therapies in a face-to-face setting versus virtual communications,” Godin said.
However, HLS continues to be in negotiations with the pCPA, which undertakes reimbursement pricing negotiations on behalf of most government-funded plans. The company has been negotiating since January, with Atkinson noting that the company had expected the negotiations to be complete by now, and company management hopeful for a deal by February 2022.
The company is also continuing to ready new products for market, with the next launch planned to be PERSERIS, a long-acting risperidone injected subcutaneously, in early 2022, with management targeting peak sales between C$15 million and C$20 million for the product.
The updated reporting has prompted Atkinson to revise some of his financial projections, as he now forecasts HLS to reach $59.9 million in revenue for 2021, down from the initial $61 million estimate, but still playing to modest year-over-year potential growth of 6.8 per cent. Meanwhile, Atkinson has also lowered his 2022 revenue estimate to $97.4 million from $104.8 million, attributing the softening of the forecast to a modestly longer timeline to first public plan reimbursement than originally thought.
From an EBITDA perspective, Atkinson is now calling for $26.5 million in 2021 instead of the initial $25.4 million estimate, while 2022’s projection remains fairly steady at $38.2 million instead of $38.1 million.
Atkinson projects the Price/Sales multiple to be 8.2x in 2021, then dropping to 5x in 2022. He projects similar movement from the EV/adjusted EBITDA multiple, forecasting the multiple to be 21.6x in 2021 before dropping to 15x in 2022.
With continued progress on Vascepa and a solid balance sheet with strong cash flow, Atkinson remains a believer in what HLS is capable of in the marketplace.
“We remain bullish on the potential for Vascepa to become a blockbuster drug in Canada once the COVID headwinds subside,” Atkinson said. “There remains significant potential for further increases in management’s peak sales outlook of Vascepa, especially if family physicians embrace the drug as a “top-of-mind” complement to statins for CV risk reduction and in turn drive stronger patient adoption.”
Overall, HLS Therapeutics’ stock price has risen by nine per cent over the course of the year, hitting a high point of $21.37/share on March 19.