iA Capital announces record quarter for Valeo Pharma

Chelsea Stellick, analyst at iA Capital Markets, sees value in Valeo Pharma (Valeo Pharma Stock Quote, Chart, News, Analysts, Financials CSE: VPH), reiterating its “Buy” rating and its target price of $ 1.90 / share for a potential return of 164% in a client update Thursday .

Founded in 2003 and based in Montreal, Valeo Pharma Inc. specializes in the commercialization of branded pharmaceutical products in the Canadian market, with a strong portfolio of 11 commercial stage products in the respiratory, hospital, neurology, oncology and other sectors. .

Stellick’s latest analysis comes after Valeo Pharma released its third quarter financial results, which Stellick rated as impressive.

The results were marked by revenue of $ 5.7 million in the quarter, a sequential growth of 114% and an increase of 280% year-over-year, as well as nine-month record business of $ 10.2 million for a 94% increase. to augment.

The company also posted a record gross profit of $ 2.2 million in the quarter, up from $ 100,000 in the same quarter of 2020.

Meanwhile, the company’s adjusted EBITDA recorded a loss of $ 800,000, just below the loss of $ 700,000 it suffered in the same quarter of 2020.

From a funding perspective, Stellick notes that the company has $ 9 million in cash, although $ 3.3 million in bridge funding matures in January. However, the company also has 27 million warrants outstanding at $ 1.06 / share, which Stellick says could represent a significant inflow of capital once the company’s stock price rises again.

Stellick notes that the company was the subject of bank fraud with one of its major suppliers earlier this year, resulting in a one-time loss of $ 900,000 which will be reflected in the third and fourth quarters.

Stellick attributes the increase in revenue to increased sales of Redesca, a low molecular weight injectable heparin biosimilar used primarily to treat and prevent deep vein thrombosis and pulmonary embolism.

Redesca’s sales efforts were bolstered by the announcement in July that it is now covered for public reimbursement in seven provinces and territories across Canada, in addition to several government agencies and 70 percent of private policyholders in Canada. Canada for reimbursement of private health plans.

“Redesca is the crown jewel of the VPH portfolio,” Stellick said. “We expect Redesca to continue to support strong growth in the coming quarters as it reaches its annual projection of over $ 30 million in peak sales.”

Meanwhile, Stellick also expects gradual market penetration for Enerzair and Atectura, the company’s entry into the asthma market, based on strong demand for samples early after their initial commercial launch. in June.

“The third quarter commercial launches of Redesca, Enerzair and Atectura, three transformational products for Valeo, contributed to our record third quarter results. Valeo is rapidly evolving into a leading Canadian pharmaceutical company with strong management and an extensive business infrastructure. Our innovative products and pipeline point to robust revenue growth for years to come, ”said Steve Saviuk, CEO of Valeo Pharma, in the company’s September 22 press release. “Redesca quickly became our best-selling product, while the initial interest of healthcare professionals in Enerzair and Atectura, our two newly launched asthma therapies, was very strong and supports our view that these therapies will be important drivers of income. “

Stellick believes Valeo Pharma will become a profitable operation in 2022, supported by revenue of $ 44 million to mark a potential 159% year-over-year increase, while its 2023 projection of $ 90 million. dollars would represent a potential of 105% year over year. increase of the year.

Meanwhile, Stellick predicts EBITDA will turn positive in 2023 with a projection of $ 23.5 million for a 26.1% margin after a forecast loss of $ 400,000 in 2022, followed by a jump to 46. , $ 5 million in 2024 for a potential year of 97.9%. – year-over-year increase and a margin of 34.7 percent.

Net income is also expected to turn positive in 2023 at $ 17 million, according to Stellick’s estimates, with that figure expected to double to $ 34 million in 2024.

In 2023, Stellick also predicts that the company’s free cash flow will turn positive to $ 15.8 million after an expected loss of $ 3.2 million in 2022, followed by another expected jump to 32.2. million dollars in 2024.

Overall, Stellick believes the company is in a positive position to move forward.

“While the record gross profit of $ 2.2 million was fully offset by higher spending to support the expanded portfolio, the third quarter of FY21 was clearly a strong quarter that clearly shows the path to growth. VPH’s profitability on a dramatically expanding revenue base, ”Stellick said. “Redesca’s growth was in the foreground, and we are looking for further solid quarters of Redesca sales growth through F2022.”

Overall, Valeo Pharma’s share price is down 38.2 percent year-to-date, peaking on January 25, when it hit $ 1.46 / share.

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