DRI Healthcare wins a target raise from Raymond James

The hits keep rolling in from DRI Healthcare Trust (DRI Healthcare Trust Stock Quote, Charts, News, Analysts, Financials TSX:DHT.UN), as the company just announced the acquisition of its second royalty interest on sales of myelofibrosis drug VONJO.

The company’s astute ability to put its money to work has Raymond James analyst Rahul Sarugaser impressed. Sarugaser maintained an “Outperform” rating on the stock in a Monday report to clients while raising his target price once again to $20.00 (previously $18.00). Sarugaser said the royalty market is improving and DRI Healthcare is in a great position to capitalize on the opportunity.

DRI Healthcare, an open-ended biopharma royalty-holding trust managed by DRI Capital, announced on Friday an agreement to purchase a royalty interest in the worldwide net sales of VONJO from S*Bio Pte Ltd for US$66 million. The deal will see DRI lock down an uncapped royalty on worldwide sales and entitles DRI to a low single-digit per cent royalty and up to US$107.5 million in regulatory and sales-based milestone payments.

“VONJO has addressed a significant unmet need in cytopenic MF patients and has seen an incredible uptake in its first year on the market,” said Behzad Khosrowshahi, Chief Executive Officer of the DRI Healthcare Trust, in a press release. “We are excited to purchase a second royalty on this long duration, high-quality asset.

All told, DRI says it has deployed US$636 million and an added US$59 million in milestone payments since its IPO, with now a pipeline of over US$2.5 billion in high-quality assets available and an aim of deploying US$850-$900 million by the end of 2025.

The news comes after DRI two weeks ago announced two other transactions: a royalty interest on Orserdu and the accelerated repayment of about $55 million in DRI-issued debt.

On management’s aim of putting in $850-$900 million by 2025, Sarugaser said the marker is easily achievable, based on DRI’s excellent work so far.

“There should remain little doubt in investors’ minds about DRI’s capacity to drive cash flows during the next 10 years. Also of note: DRI has, with this acquisition, redeployed the net proceeds from its TZIELD royalty sale (late Apr. 2023), placing the capital in deals the company believes will generate more attractive returns than the TZIELD royalty may have,” Sarugaser wrote. “A quick and effective turnaround.”

“The royalty market continues to improve and DRI continues to prove its talent for identifying high-return assets, thus cementing its status as a premier player in this space, with its cadence constrained only by capital,” he said.

Sarugaser had previously raised his target from $13.50 in April to $16.00 in May and then $18.00 on June 30. At press time, his new $20.00 target represented a projected one-year return of 76 per cent.