HLS Therapeutics is undervalued, says Stifel

Specialty pharma company HLS Therapeutics (HLS Therapeutics Stock Quote, Charts, News, Analysts, Financials TSX:HLS) has fallen a long way over the past year and a half, but Stifel GMP analyst Justin Keywood sees the stock retaking a lot of ground. In a Flash Note on Monday, Keywood reiterated a “Buy” rating and $18.00 target price on HLS, saying the company and stock are undervalued.

HLS Therapeutics, which acquires and commercializes late-stage development and commercial stage promoted pharma products for the North American markets, announced on Monday that CEO Gilbert Godin will be retiring from both the head position and the Board and Craig Millian will take over Godin’s CEO position and Board seat. Millian has over 20 years experience in the pharma industry and was most recently COO at Corbus Pharmaceuticals.

“Craig is a proven industry leader with a 20-year track record of successfully managing commercial operations at several biopharma companies,” said Greg Gubitz, Chairman of HLS, in a press release. “He is well suited to lead our product portfolio having operated in multiple therapeutic areas, including both CNS and cardiovascular.”

Commenting on the move, Keywood said there was no change in either HLS’ strategy or the analyst’s own investment thesis as a result of the proposed switch at the top.  

“[We] expect a continued focus to drive greater Vascepa adoption in Canada, additive to a high margin base business. Our recent changes in forecasts reflect lower pricing for Vascepa but still a substantial growth asset,” Keywood wrote.

Keywood took account of sales of HLS’ cardiovascular drug Vascepa, which showed 152.5 per cent growth in new prescriptions by a March, 2023, count. The analyst said that Ontario continues to be Vascepa’s best-selling province at 44 per cent of all scrips, although that’s down from 60 per cent last May. 

“This shows the early impact of public access, where Quebec was 38 per cent of all scrips in January after seven full months with a public listing in place, despite representing only 15 per cent of the target population. We would expect scrip levels to skew back towards Ontario, following the listing agreement at the end of July,” he said.

At the time of publication, Stifel’s $18.00 target on HLS represented a projected one-year return of 194 per cent.

Keywood said HLS has a strong but undervalued cash flow platform for leveraging new growth and that Stifel has done extensive due diligence on its products, through speaking with medical contacts, including doctors and industry experts.

“From this due diligence, we believe there are certain benefits to the platform that are not reflected in the stock price,” Keywood wrote.