DRI Healthcare Trust T.DHT.UN

Alternate Symbol(s): DHTRF

Healthcare

DRI Healthcare Trust is an open-ended trust that provides unitholders with differentiated exposure to the anticipated growth in the global pharmaceuticals and biotechnology markets. Its business model is focused on managing and growing a diversified portfolio of pharmaceutical royalties to deliver attractive growth in cash royalty receipts over the long term. Geographically, it has a presence in the United States; European Union; Japan, and Rest of the world.

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DRI Healthcare Trust

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Post by retiredcfon Oct 03, 2022 9:41am

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Post# 35001249

RBC

October 2, 2022

DRI Healthcare Trust
DRI announces third and largest royalty deal this year - on ophthalmology drug Omidria

TSX: DHT-U | CAD 7.60 | Outperform | Price Target CAD 14.00

Sentiment: Positive

Our initial view: After announcing two smaller deals earlier this year, DRI announced the acquisition of a royalty interest in Omidria (phenylephrine and ketorolac intraocular solution) today for an upfront payment of $125MM. Based on the capped royalties till 2030, we estimate an IRR of 9.3% on this transaction. DRI has deployed $184.5MM in royalty acquisitions this year, surpassing the $150MM annual target of capital deployment. While we find the expected pacing of royalties from this deal attractive versus our current company estimates, this appears to be the second sub-10% IRR transaction vs the targeted 12% by management. Separately, the company also provided an update on the Natpara royalty, where the company noted that the issues that led to the recall of Natpara in the US are expected to remain unresolved for the foreseeable future. DRI is reviewing its options with respect to the Natpara Royalty.

Acquired royalty interest in Omidria: DRI announced the acquisition of a new royalty interest in Omidria from Omeros for an upfront payment of $125MM. The drug was approved by the FDA in May 2014 and EMA (Europe) in July 2015 for intracameral use during cataract surgery or intraocular lens replacement. The drug is used to maintain pupil dilation and reduce postoperative pain. Omidria is marketed by Rayner Surgical.

Transaction details: The upfront payment of $125MM entitles DRI to monthly royalties till 2030. The royalties are subject to annual caps of $1.67MM for the four months from Sep-22 through Dec-22; $13MM for 2023; $20MM for 2024; $25MM for each of 2025-2028 (inclusive); $26.25MM for 2029; and $27.5MM for 2030. Assuming DRI receives the capped royalties, the IRR on the transaction is 9.3%. DRI noted that Omeros collected $31.1MM in royalties for H1/22.

Update on Natpara royalties: DRI also provided an update on Natpara royalties. The company noted that the issues that led to the 2019 recall of Natpara in the US are likely to remain unresolved for the foreseeable future. The Natpara royalty is received on global sales of Natpara and is subject to an aggregate cap of $125MM of which DRI has received $85.9MM as of September 30, 2022. Management noted that it is reviewing its options with respect to the Natpara Royalty. The royalties on European and RoW Natpara sales are expected to continue in the near term.

Call details: Today at 10am. Dial-in numbers: 1-888-664-6392 or 416-764-8659. Webcast link.