HLS Therapeutics stock is over a triple from here, says Stifel

The trend lines look great for HLS Therapeutics (HLS Therapeutics Stock Quote, Charts, News, Analysts, Financials TSX:HLS) on its omega-3 product sales across Canada, according to Stifel GMP analyst Justin Keywood, who provided an update to clients on Monday. 

Keywood reiterated a “Buy” rating on the stock and $18.00 target price, which at press time represented a projected one-year return of 206 per cent.

HLS is a specialty pharma company founded in 2014. The company bought the rights in 2015 to lead schizophrenia drug Clozaril and then the US marketing rights for acne product Absorica in 2016, followed by in-licensing deals for cardiovascular drugs Vascepa and Trinomia in 2017. 

In his report, Keywood looked at data for Canada’s prescriptions for Vascepa, showing 6,372 total prescriptions for the four weeks leading up to May 26, representing a 102 per cent year-over-year and five per cent sequential improvement. 

Keywood said 40 per cent of scrips were attributed to Quebec, which represents about 20 per cent of HLS’s total addressable market for Vascepa in Canada. The analyst argued that Quebec was one of the first provinces to receive public access to Vascepa, which implies sustained, solid growth ahead for the most populous province of Ontario. He noted that HLS is still working with BC and Alberta to secure public access, now more than three years after the initial launch of the drug.

“The progression in scrips helps de-risk estimates where we factored in much lower pricing than previously conveyed. We forecast ten per cent organic growth in F2023 with 36 per cent adj. EBITDA margins with Vascepa sales up ~70 per cent year-over-year but offsetting some expected pressure in Clozaril,” Keywood wrote.

“We also note that HLS has been actively buying back shares recently as new board changes have also been announced,” he said.

On the board changes, HLS recently announced that large shareholder Polar Asset Management has put a director on HLS’ board, while two board members are set to leave and Chair and co-founder Greg Gubitz is set to retire, in total reducing HLS’ board from ten to eight members.

Keywood thinks HLS will generate full 2023 revenue and EBITDA of $67.8 million and $24.2 million, respectively, and 2024 revenue and EBITDA of $95.0 million and $37.8 million, respectively.

“We see the growth and margin profile as leading to a re-rating in valuation and continued momentum in Vascepa Rx data helps de-risk greater value,” he said.