HLS Therapeutics is a screaming Buy right now, says Stifel

Stifel GMP analyst Justin Keywood is encouraged by the progress from Canadian pharma name HLS Therapeutics (HLS Therapeutics Stock Quote, Chart, News, Analysts, Financials TSX:HLS), reiterating his previous “Buy” rating and $36/share target price to indicate a 137.6 per cent projected return in a recent update to clients.

Toronto-based HLS Therapeutics is a specialty pharma company focused on acquiring and commercializing late-stage development, commercial-stage promoted and established pharmaceutical products for the North American market.

Keywood’s updated outlook comes after HLS provided an update regarding its efforts to obtain product listing agreements in all of Canada’s provinces and territories for its Vascepa offering after completing public reimbursement negotiations with the pCPA in April.

Keywood believes there is an opportunity for investors to accumulate shares at depressed price levels.

“​​Investors appear to be on the sidelines in the current unfavorable market conditions and with low liquidity in HLS’ shares, the fundamental value of the business is not nearly reflected,” Keywood said in his June 22 report. “We will also point out the recession resilient nature of HLS’ business but still in a growth mode as demand for schizophrenia and heart health is not seen as being impacted by macroeconomic factors.”

To this point, HLS has secured agreements with Quebec, New Brunswick, the Northwest Territories and the NIHB to cover approximately 20 per cent of the target population. 

Notably, Ontario is a big driver of Vascepa sales at 60 per cent of the Canadian market despite representing 40 per cent of the target population, with Keywood noting that a head cardiologist at St. Michael’s Hospital in Toronto told him a number of doctors do not prescribe patients on Vascepa without public reimbursement in-place, even with private insurance available.

Keywood’s report also included prescription data for Vascepa in Canada in May, which saw a 48 per cent year-over-year increase in new Vascepa prescriptions, a 102 per cent uptick in total prescriptions dispensed, and 124 per cent jump in the number of Vascepa pills dispensed to suggest repeat prescriptions at higher volumes.

“We are pleased to build on our agreement with the province of Quebec to add three additional public listings as we work to bring Vascepa to Canadians who are battling cardiovascular disease, the number one killer worldwide,” said Gilbert Godin, CEO of HLS Therapeutics in a June 22 press release. “We continue to work with other provinces and territories to secure coverage for Vascepa from their publicly funded drug plans and will provide further updates on our progress as they occur.”

Keywood forecasts a modest 21.4 per cent year-over-year increase in revenue to $75.9 million in 2022 with an EV/Rev multiple of 5x, then forecasts a near doubling to $147.3 million in 2023, paired with an EV/Rev multiple of 2.6x.

The EBITDA projections follow a similar path, with Keywood forecasting EBITDA of $32.4 million in 2022 with an EV/EBITDA multiple of 11.8x, followed by a spike to $63.5 million in 2023, paired with an EV/EBITDA multiple of 6x.

HLS Therapeutics’s share price has had an up-and-down first half of 2022, initially climbing as high as $15.99/share on March 10 before dropping as low as $11.97/share on June 23.