Valeo Pharma has a 127 per cent upside, Echelon says

Echelon Capital Markets analyst Stefan Quenneville continues to like Valeo Pharma (Valeo Pharma Stock Quote, Charts, News, Analysts, Financials TSX:VPH), saying the specialty pharma company will show strong operating leverage as it commercializes its portfolio of assets. Quenneville maintained a “Speculative Buy” rating in a Thursday update and $1.00 target price, which at press time translated to a projected one-year return of 127 per cent.

Valeo Pharma has pharmaceutical products focusing on respiratory, specialty and hospital generic products in Canada, with assets including Atecture and ENerzair Breezhalers, asthma drugs, thrombosis and pulmonary embolism drug Redesca, glaucoma drug Simbrinza, dry eye disease drug Xiidra and Allerject epinephrine injector.

On Thursday, Valeo gave a financial and commercial update which included guidance for its second quarter 2023 (March end). For the Q2, Valeo is forecasting revenue over $13.5 million and an adjusted EBITDA loss less than $2.0 million.

In his commentary, CEO Steve Saviuk said Velo is continuing to show quarterly revenue growth and improvement in financial performance as its core products continue to grow on a year-over-year basis.

“We are especially pleased with the increased physician and patient adoption of our innovative asthma therapies which have long growth runways ahead of them,” said Saviuk in a press release. ”Our business development efforts are focused on adding additional core products in the near term to leverage our operational and commercial platform and accelerate our timeline to profitability.”

Looking at management’s guidance, Quenneville said the expected over $13.5 million topline while representing an impressive 180 per cent year-over-year growth rate would be below expectations, where his estimate was $15.0 million and the consensus was at $14.4 million. The negative $2.0 million expected EBITDA loss would be less than Quenneville had expected, where the analyst had forecasted negative $2.6 million and the Street was at negative $2.4 million.

Quenneville said he expects Valeo to continue its consistent march toward profitability, with a clear line of sight to positive adjusted EBITDA.

“With revenues growing over 180 per cent in the quarter and its sales, marketing, and corporate infrastructure now largely in place, we believe the Company will demonstrate significant operating leverage going forward as it commercializes its promising, high-growth portfolio and potentially adds new, synergistic products. As such, we continue to view VPH as a compelling opportunity for investors and reiterate our Spec. Buy rating and $1.00/shr target price,” Quenneville wrote.

With the update, Quenneville modelled full fiscal 2023 and 2024 (October year end) revenue of $61.0 million and $89.4 million, respectively, and fiscal 2023 and 2024 EBITDA of negative $6.5 million and positive $7.4 million, respectively.