HLS has price target cut at Raymond James

Following the company’s fourth quarter results, Raymond James analyst Rahul Sarugaser has chopped his price target on HLS Therapeutics (HLS Therapeutics Stock Quote, Chart, News, Analysts, Financials TSX:HLS).

On March 14, HLS reported its Q4 and fiscal 2023 results, In the fourth quarter the company posted Adjusted EBITDA of $5.3-million on revenue of $15.9-million.

“Two thousand twenty-three was a year of transition for HLS, with leadership changes and an increased focus on operational execution that has us entering 2024 well positioned for our next phase of growth,” said CEO Craig Millian. “With Vascepa, we made important changes to our commercial strategy that included updating our primary care go-to-market model with Pfizer, along with renewed efforts to improve access and reimbursement, primarily in B.C. and Ontario. In 2024, we have already seen positive developments in each of these areas, which we believe will help us generate accelerated growth and a transition to profitability for Vascepa later this year.Clozaril continued to be a consistent performer and generator of cash flow in 2023. The number of patients on Clozaril in Canada grew by 1 per cent for the year, reflecting the underlying stability of Clozaril in the market. Along with maintaining strong margins, we think there are opportunities to drive modest growth for the product, and this will also be a focus of ours in 2024.”

The analyst says the quarter was about what he expected but says there are some storylines he will be watching closely.

“4Q23 was largely in-line, with Q/Q metrics most flat,” he said. “Below the surface, though, we see HLS’s Rev. mix beginning to shift toward Vascepa and away from royalties (via contractual expiry of BSX royalty), with Clozaril Rev. holding steady, which we view positively. HLS’s Vascepa Rev. continues to inch upward, with 9% Q/Q and 45% Y/Y sales growth, and FY23 scripts growing 86% vs. FY22. HLS management anticipates FY24 Vascepa Rev. to grow 55-70% vs. FY23, and, later in FY24, the company believes its Vascepa business will begin contributing positive adj. EBITDA, potentially enabling HLS’s overall adj. EBITDA profile to be flat in FY24 vs. FY23 (Vascepa ↑, royalties ↓, OpEx ↓). See FY24 Outlook below. We, however, take a more conservative approach, and estimate $63.1 mln in Rev. and $19.6 in EBITDA for FY24. Should Vascepa sales start to hockey-stick in earnest, everything changes.”

In a research update to clients March 15, Sarugaser maintained his “Market Perform 3” rating but cut his price target on HLS from $6.50 to $5.00.

The analyst thinks HLS will generate EBITDA of $20-million on revenue of $63-million in fiscal 2024. He expects those numbers will improve to EBITDA of $23-million on a topline of $73-million in fiscal 2025.