Rahul Sarugaser of Raymond James likes the story around HLS Therapeutics (HLS Therapeutics Stock Quote, Chart, News, Analysts, Financials TSX:HLS), maintaining his “Outperform 2” rating and raising his target price from $26/share to $28/share for a projected return of 104.4 per cent in an update to his clients on Monday.
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. Sarugaser’s updated analysis comes after the company secured public reimbursement for Vascepa, an FDA-approved oral medication shown to reduce cardiovascular risk when paired with a statin.
“This LOI is a significant milestone for making Vascepa available to Canadians who are at-risk for cardiovascular disease and who are a part of one of the country’s public payer plans,” said Gilbert Godin, Chief Executive Officer of HLS in the company’s April 26 press release. “The LOI sets out the terms for reimbursement of Vascepa for statin-treated patients with established cardiovascular diseases and elevated triglycerides, which follows on the patient-population recommendation issued previously by the Canadian Agency for Drugs and Technologies in Health (CADTH).”
“We now look forward to working diligently with all participating jurisdictions to secure coverage from publicly funded drug plans across Canada, and for Vascepa to be added to their respective plan,” Godin added.
Company management has slightly reduced its financial guidance, effectively pushing its targets out one year to project a range between $250 million and $300 million in revenue by 2026, paired with an adjusted EBITDA guideline of 30 per cent.
In keeping with management’s updated view, Sarugaser has also pushed out his financial estimates by a year, thereby reducing his 2022 revenue projection from $82 million to $72.9 million for a potential year-over-year increase of 21.7 per cent. Sarugaser makes a more dramatic reduction to his 2023 revenue projection, slashing it from $194 million to $116 million, though the revised figure still represents a potential year-over-year increase of 59.1 per cent.
From there, Sarugaser forecasts the company’s revenue to take a steep jump, eventually reaching a projected $358.1 million in 2026.
Sarugaser also made adjustments to his EBITDA projections, lowering his 2022 estimate from $35 million to $28.4 million for an implied margin of 39 per cent. As it was with revenue, Sarugaser took a significant bite out of his 2023 EBITDA estimate, dropping from $100 million to a new projection of $40.8 million for an implied margin of 35.2 per cent.
Despite the drops, gross margins remain at high projections, setting a 92.5 per cent gross margin forecast in 2022 and remaining there throughout the remainder of Sarugaser’s analysis period in 2026.
Looking ahead to first quarter filings, Sarugaser forecasts a relatively flat quarter of $15.6 million in revenue compared to the $15.7 million reported in the final quarter of 2021 (consensus expectation is $15.7 million), paired with an EBITDA estimate of $6.4 million (consensus estimate $6 million) and a net income loss projection of $3.5 million (consensus projects a $3.7 million loss), though Sarugaser believes the Vascepa agreement will expedite growth for HLS.
“While we do anticipate flat 1Q22 Rev., we anticipate HLS’s newly announced public reimbursement, complemented by its supercharged HLS/Pfizer sales force, to drive a Rev. inflection into 2H22,” Sarugaser said.
HLS Therapeutics has seen its stock price drop by 8.7 per cent since the start of 2022, unable to sustain an early peak of $15.99/share on March 10, having dropped to a 2022 low of $13.46/share on Monday.
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