HLS Therapeutics is a Buy, says Stifel

Stifel GMP analyst Justin Keywood remains in a positive headspace about HLS Therapeutics (HLS Therapeutics Stock Quote, Chart, News, Analysts, Financials TSX:HLS), reiterating his previous “Buy” rating and $36/share target price to indicate a 137.6 per cent projected return in an update to clients on Wednesday.

Toronto-based specialty pharma company HLS focuses on acquiring and commercializing late-stage development and commercial-stage promoted and established pharmaceutical products for the North American market.

Keywood’s key points come after HLS published new data in March pertaining to prescriptions of Vascepa, which showed continued acceptance of the prescription heart issue combatant at a net sales run rate of $27 million, up 25 per cent sequentially and 230 per cent year-over-year.

However, the figure came in slightly below the initial $28 million estimate after Keywood recalibrated his estimated total patient count, which now sits at 8,216, to be consistent with the last disclosed patient count from the end of 2021, though Keywood notes the number is still well below the potential for 100,000 prescriptions.

Vascepa has been on the move, as HLS began a selling partnership with Pfizer in September, which has seen increased demand for the drug at higher volumes. Meanwhile, private reimbursement for the drug remains around 90 per cent in Canada with no public reimbursement plan in place, though company management believes that agreement will be reached within weeks as its initial two-year target passed in February.

“The health benefits for Vascepa have been clearly demonstrated with several de-risking elements, where the negotiations are centered on pricing,” Keywood said.

HLS has set a $300 million sales target for Vascepa, which is to be a roughly 50/50 split for private/public reimbursement.

After the company finished 2021 with $62.5 million in revenue, Keywood forecasts a significant jump in 2022, with the $149.9 million revenue forecast suggesting year-over-year growth of 139.9 per cent.

Accordingly, he also sees the company’s EV/Revenue multiple dropping from the reported 8.3x in 2020 to 7.5x in 2021, then plummeting to a projected 3.1x in 2022.

Meanwhile, the company finished 2021 with $28.1 million in EBITDA for an implied 45 per cent margin, and Keywood believes it will be followed by another jump to $66.8 million in EBITDA for 2022, though the implied margin dips slightly to 44.6 per cent.

Keywood’s EV/EBITDA multiple projections also takes a step forward, with the analyst forecasting a drop from 19.4x in 2020 to a projected 16.7x in 2021 before falling off to a projected 7x in 2023.

Keywood also forecasts positive EPS of $0.67/share for 2022, bringing about a P/E multiple forecast of 17.7x.

HLS Therapeutics has been flat for 2022 with a three per cent overall return since the start of the year but there was a significant selloff over the last couple of months of 2021. The stock began 2022 trading at $14.76/share and after dropping to $13.83/share on February 22, it rose to $15.99/share on March 10.