$0.50 to $0.70 per share — that’s been the range over the past 12 months for Canadian specialty pharmaceutical stock Valeo Pharma (Valeo Pharma Stock Quote, Charts, News, Analysts, Financials TSX:VPH). But investors can expect upward movement over the coming year, according to iA Capital Markets analyst Chelsea Stellick. In a Tuesday report, Stellick maintained a “Buy” rating and $1.50 target price on VPH, representing at press time a projected return to target of 138.1 per cent.
Stellick says there’s continued growth on the horizon for a number of Valeo’s drugs and that the company’s just-reported fourth quarter earnings show how well Valeo’s newly acquired assets are fattening up the company’s top and bottom lines.
“Q4/F22 was a record revenue quarter for VPH following a near full quarter contribution from recently acquired ophthalmology and respiratory assets. Lead products Enerzair and Atectura continue to gain traction amongst prescribers. Several growth drivers will ensure record results in upcoming quarters and profitability by the end of F2023,” Stellick said.
Valeo, which acquires and in-licenses brand name and generic, late-development or commercial-stage drugs for sale in Canada and the United States, reported Q4 2022 results on Monday, coming in with revenue of $12.7 million, which represented a year-over-year increase of 274 per cent and a 109 per cent sequential increase. Annual revenue was up 105 per cent to $27.7 million.
Commenting on the year that was, Valeo CEO Steve Saviuk said 2022 represented a major step forward for the company and he underlined the importance to the company of having acquired the rights to dry eye medication Xiidra, eye pressure medication Simbrinza and epi-pen Allerject.
“With the addition of these new products and the continued strong performance of our asthma therapies, Enerzair and Atectura, and anticoagulant Redesca, we anticipate all our business units to continue producing strong revenue and margin growth in 2023 as we forecast delivering record quarterly revenues again in the first quarter of 2023,” Saviuk said in a press release.
Looking at the quarterly numbers, Stellick said the $12.7 million topline was exactly at the guidance midpoint and in-line with the consensus forecast, while adjusted EBITDA at negative $2.9 million was lower than expected, with the Street having called for negative $1.7 million. Stellick said the bottom line impact was related to non-recurring amortization charges related to new product agreements, non-core product impairment charges and inventory write-downs for core products, all of which pushed down VPH’s gross margin to eight per cent and impacted EBITDA.
At the same time, Stellick noted the solid performance from Valeo’s allergy assets Enerzair and Atectura, where a “significant market opportunity” still exists in Canada for the company’s products. Stellick also said a recent mandate from the Ontario government calling for a switch of biologics to biosimilars should benefit Valeo’s Redesca growth prospects.
“We expect Redesca to continue taking market share from the originator as provinces and hospitals exit historical agreements and group purchasing organizations prefer biosimilars,” Stellick wrote.