From Globe & Mail this AM Hi guys, here are some upgrades this morning. I don't see a lot for sale. Investors don't want to sell......yet at least. Good long term hold here.
GLTA
SM
Following a “big” fourth-quarter 2023 revenue and earnings beat and the announcement of “significant” new distributions for shareholders, Raymond James analyst Rahul Sarugaser raised his recommendation for DRI Healthcare Trust (
) to “strong buy” from “outperform” previously, touting the potential gains from growing demand for synthetic royalties.
“DRI is seeing a significant upwell in demand for synthetic royalties among biopharma companies (de novo royalties created by the drug’s marketer to fund operations vs. traditional royalties, which are held by inventors/academic institutions/small biotechs and monetized directly by royalty players like DRI),” he said. “Management indicates that up to 50 per cent of its deal pipeline comprises synthetic royalties (up from less than 10 per cemt), and DRI intends to allocate 20-40 per cent of assets toward these in them medium-term.
“We highlight this recent ramp in interest around synthetic royalties as a key developing (and overlooked) theme in the drug royalty and biopharma markets, and we believe it represents a significant component of the broad-based increase in demand seen by drug royalty companies such as DRI, RPRX, XOMA, LGND, and others. We understand that biopharma executives are increasingly recognizing royalty financing as a third leg of their financing stool (vs. equity and debt financing). And, importantly, a non-dilutive option. This increase in synthetic royalty demand fundamentally increases the TAM for drug royalty players, representing, we believe, a true sector tailwind (irrespective the biopharma/biotech capital market environment’s quality) that we will be following closely.”
After the bell on Wednesday, the Toronto-based Trust reported quarterly revenue of $75.8-million, up from $34.1-million in fiscal 2022 and exceeding both Mr. Sarugaser’s $34.1-million estimate and the consensus forecast on the Street of $32.4-million. Adjusted EBITDA grew to $46.5-million from $20.3-million and also easily topped projections ($32.5-million and $31.3-million, respectively).
DRI also announced a special cash distribution to unitholders as at Dec. 31 of 26.62 cents per unit and a special unit distribution of 76.40 cents per unit. That was on top of its regular quarterly cash distribution of 7.5 cents per unit.
“Between outperformance in core royalty cash receipts (material sales outperformance of new assets, esp. Orserdu, and more durable-than-expected sales of mature assets) and the trigger of three big sales milestones ($3.4-million from Orserdu I, $30.3-million from Orserdu II, $5.0-million from Vonjo II), DRI blew the doors off its 4Q23,” he said. “And, importantly, DRI shared its windfall with shareholders, announcing distributions equivalent to $1.10/unit during 4Q23 (special cash dist. of $0.2662/unit, special unit dist. equivalent to $0.7640/unit, regular quarterly cash dist. of $0.0750/unit), making up a cumulative FY23 cash and unit distribution of $1.8636/unit worth $92-million. (And, reasonably, the company paid itself a $5.9-million performance fee on these high-profit milestone payments). DRI also escalated its FY24 regular quarterly cash distributions to $0.0850/unit, sweetening the deal for new shareholders interested in a highly-profitable, dividend-paying growth stock.”
Seeing its royalty income guidance for fiscal 2024 as “extremely conservative,” Mr. Sarugaser raised his target for units of DRI, which was on the firm’s “2024 Analysts’ Best Picks” list, to $24 from $22. The average is $21.06.
Elsewhere, others making changes include:
* National Bank’s Zachary Evershed to $23.50 from $22 with an “outperform” rating.
* RBC’s Douglas Miehm to $20 from $19 with an “outperform” rating.
* CIBC’s Scott Fletcher to $19.50 from $19 with an “outperformer” rating.