Vascepa Sales In Canada And Cost Cuts Will Transform Prospects

Key Takeaways

• Significant revenue growth is expected from Vascepa in Canada, driven by increased prescriptions and stabilizing payer mix, positively impacting revenue.
  
• Strategic cost reductions and expansion through partnerships aim to support growth, while share buybacks enhance earnings per share.
  
• Dependence on regulatory approvals and payer mix, alongside currency fluctuations and declining U.S. sales, pose risks to HLS Therapeutics’ revenue growth and market access.

Catalysts

A specialty pharmaceutical company, acquires and commercializes pharmaceutical products for the treatment of psychiatric disorders, central nervous system, and cardiovascular disease in Canada, the United States, and internationally.

• The 2025 outlook for HLS Therapeutics includes expectations of significant revenue growth from Vascepa in Canada, with projected net sales growth of 18% to 26% in Canadian dollars, driven by increased prescription growth and efforts to stabilize the payer mix, impacting revenue positively.
  
• The company has implemented substantial cost reductions, including exiting the Pfizer promotional services agreement, leading to lower operating expenses by double digits, which supports improved net margins as they maintain the infrastructure needed for sustained growth.
  
• HLS Therapeutics has introduced a co-pay assistance program to boost patient retention in the private insurance segment, potentially increasing the lifetime value of prescriptions and positively affecting revenue growth in a higher-margin segment.
  
• There are ongoing strategic efforts to expand the existing product portfolio through partnerships or licensing in Canada, which could drive top-line growth without significant upfront capital outlay, contributing positively to revenue and earnings.
  
• The company is re-engaging in share buybacks under its NCIB program with expectations that buybacks could significantly enhance earnings per share (EPS) by reducing the number of shares outstanding.

HLS Therapeutics Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming HLS Therapeutics's revenue will grow by 5.2% annually over the next 3 years.
• Analysts are not forecasting that HLS Therapeutics will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate HLS Therapeutics's profit margin will increase from -34.7% to the average CA Pharmaceuticals industry of 0.7% in 3 years.
• If HLS Therapeutics's profit margin were to converge on the industry average, you could expect earnings to reach $439.9 thousand (and earnings per share of $0.01) by about April 2028, up from $-19.7 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 367.8x on those 2028 earnings, up from -5.0x today. This future PE is greater than the current PE for the CA Pharmaceuticals industry at 19.3x.
• Analysts expect the number of shares outstanding to decline by 0.07% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 5.82%, as per the Simply Wall St company report.

HLS Therapeutics Future Earnings Per Share Growth

Risks

• Foreign exchange fluctuations, particularly the depreciation of the Canadian dollar against the U.S. dollar, could negatively impact the reported U.S. dollar revenue figures and overall financial results.
  
• Vascepa sales are heavily influenced by the payer mix, with slower growth in the more profitable private insurance segment, which could affect future revenue growth and net margins.
  
• The U.S. Clozaril business continues to experience declining sales, with a projected 2% to 4% decline in 2025, potentially impacting overall earnings and growth prospects in the U.S. market.
  
• The dependence on product listing agreements and regulatory approvals, such as the exceptional access removal for Vascepa in Ontario, can create uncertainty and have a substantial impact on revenue growth and market access.
  
• Any significant changes in U.S. tariffs or trade policies could potentially impact operations or financial performance, particularly if those tariffs affect sourcing or markets relevant to HLS Therapeutics.

Valuation

• The analysts have a consensus price target of CA$6.106 for HLS Therapeutics based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of CA$9.42, and the most bearish reporting a price target of just CA$3.99.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $65.8 million, earnings will come to $439.9 thousand, and it would be trading on a PE ratio of 367.8x, assuming you use a discount rate of 5.8%.
• Given the current share price of CA$4.25, the analyst price target of CA$6.11 is 30.4% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.