Following the company’s most recent quarterly results, Clarus Securities analyst Noel Atkinson has cut his target on HLS Therapeutics (HLS Therapeutics Stock Quote, Chart, News, Analysts, Financials TSX:HLS) nearly in half.
On March 16, HLS reported its Q4 and fiscal 2022 results. For the year, the company posted a net loss of $23.6-million on revenue of $61.5-million. While the topline number was a slight beat on 2021’s $60-million, the loss was significantly more than 2021’s $13.1-million loss.
“In 2022, HLS delivered revenue growth with reliable cash flows and adjusted EBITDA, while increasing investment in sales activities related to Vascepa,” said CEO Gilbert Godin. “On a constant currency basis, consolidated revenue for 2022 increased 5 per cent, reflecting Vascepa’s growing top-line contribution. Vascepa’s net revenue grew 67 per cent in 2022, also on a constant currency basis.
Atkinson says much of the reason for his price target cut revolves around Vascepa, which he now believes will experience linear rather than “hyper growth”.
“Vascepa revenues have been growing rapidly from a small base, but seem to be rising linearly rather than having a major hockey-stick inflection,” the analyst explained. “This suggests that peak sales may be more modest than management’s C$250-300MM outlook (unchanged) and it may take longer than 2026 to achieve peak sales. We have revised our Vascepa peak sales to a more conservative C$162MM in 2028. Even so, the incremental revenue and EBITDA contribution from Vascepa still should become meaningful by mid-2024.”
In a research update to clients March 17, Atkinson maintained his “Buy” rating on HLS, but cut his one-year price target from $24.75 to $12.50.
The analyst believes HLS will post Adjusted EBITDA of $34.5-million on revenue of $91.5-million in fiscal 2023.
“Our target price is based on our DCF valuation model,” the analyst added. “HLS shares look attractive at current levels if Vascepa can sustain meaningful revenue growth in 2023e and beyond and if sales expenses remain well contained.”
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