VPH has price target trimmed at Echelon

Following the company’s second quarter results, Echelon Capital Markets analyst Stefan Quenneville has trimmed his price target on Valeo Pharma (Valeo Pharma Stock Quote, Chart, News, Analysts, Financials TSX:VPH).

On June 13, Valeo reported its Q2, 2024 results. The company post and Adjusted EBITDA loss of $2.5-million on revenue of $14.1-million, a topline that was up 4% year-over-year.

“While we achieved record revenues in our second quarter, the top line results don’t give a full picture of the progress that we are making. Revenue softness in a number of our non-core brands coupled with short term structural delays in Ontario affecting Redesca masked the strong performance of our asthma franchise with their Q2 revenues increasing 52% over the same quarter last year”, CEO Steve Saviuk said. “Earlier today we announced a significant and well thought out restructuring of our respiratory commercial field operations. This will yield significant savings going forward while allowing us to continue to support the trajectory of our sales growth for that unit. These challenging but necessary changes were needed to place us on a sustainable footing while simultaneously positioning us solidly on a path to profitability”.

In a research update to clients June 14, the analyst maintained his “speculative Buy” rating on VPH but lowered his price target on the stock from $0.60 to $0.50. He summarized the quarter and explained the reasoning behind the move.

“Valeo Pharma yesterday reported FQ224 results that missed on both topline and adj. EBITDA due to a meaningful slowdown in Xiidra sales prior to the return of the product to Novartis at the end of May (one month earlier than expected) and ongoing delays for Redesca in gaining access in the Ontario Hospital market. However, the main takeaway was the announcement of a 20% restructuring of the workforce for its fast-growing Respiratory unit that will provide annualized savings of $5M+. We note that the unit grew 52% y/y in the quarter, and we believe the workforce cuts to be a positive trade-off between topline growth and profitability given the Respiratory salesforce’s adequate physician coverage. Nevertheless, given the miss and the month of lost Xiidra revenue, we are trimming our EV/Sales based price target to $0.50/shr (from $0.60/shr) and reiterating our Spec. Buy rating. We continue to view VPH as an undervalued opportunity for investors, with potential near-term BD activities being a likely catalyst for the stock.”

The analyst thinks the company will post and Adjusted EBITDA loss of $4.2-million on revenue of $57.2-million in fiscal 2024.