Beat the market with Valeo Pharma stock, says Research Capital

Investors should be on the lookout for a turnaround in Valeo Pharma (Valeo Pharma Stock Quote, Charts, News, Analysts, Financials TSX:VPH), according to Research Capital analyst Andre Uddin, who kept a “Speculative Buy” rating on the stock in a Wednesday report. Uddin reviewed Valeo’s latest quarterly numbers and said the stock is trading at the lower end of valuations in the Canadian specialty pharma space.

Montreal-based Valeo Pharma focuses on acquiring and commercializing drugs in the respiratory/allergy, ophthalmology and Hospital Specialty Products categories. Assets include the Allerject epinephrine injector, the dry eye drug Xiidra, inhalers Enerzair and Atectura and thrombosis drug Redesca.

Valeo reported second quarter fiscal 2023 results on Tuesday for the period ended April 30, 2023, coming in with record revenue of $13.6 million. That was a 184 per cent year-over-year increase, with Enerzair and Atecura up 271 per cent. The company’s adjusted EBITDA loss was $1.7 million compared to a loss of $3.6 million a year earlier.

“Enerzair and Atectura’s revenue and prescription growth is reflecting broadening adoption. As we are still in the early stages of their commercialization, we expect this trend to continue to gain traction in the coming quarters,” said Steve Saviuk, CEO, in a press release.

“Organic growth for our product portfolio, as well as the important contribution of our new Ophthalmology business unit, are key elements in growing our overall revenues and sharply improving our financial performance,” he said.

On the fiscal Q2, Uddin said the $13.6 million topline was slightly behind his estimate at $14.0 million, while the adjusted EBITDA loss of $1.7 million was better than expected compared to the analyst’s estimate at negative $2.3 million.

Uddin said Valeo’s cash burn for the quarter was lower than expected, giving Valeo enough cash for the next quarter, while a loan agreement from Sagard will give the company access to an additional US$10 million for potential in-licensing opportunities. At the same time, Uddin said he’s expecting an equity raise during the fiscal fourth quarter.

“We still continue to expect a positive growth trend of their asthma products in addition to the company capturing a growing market share of Allerject, assuming marketing efforts continue. Redesca market share also continues to grow — with provincial governments continuing to de-list innovator biological drugs from public reimbursement to prioritize biosimilars, Redesca may be well positioned to take advantage of this market trend,” Uddin wrote.

With the update, Uddin maintained a 12-month target price of $1.00, which at press time represented a projected return of 178 per cent.

“VPH’s stock has recently come under pressure, likely due to balance sheet concerns. We believe the stock can turn around if the company is able to turn EBITDA and cash flow positive in the upcoming quarters. VPH is trading at the lower end of valuations within the Canadian specialty pharma space – despite achieving record sales, investors are looking at the company’s current balance sheet,” he said.