DRI Healthcare Trust T.DHT.UN

National bank

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DHT.U / DHT.UN (TSX; TSX): US$7.51; C$10.55 Stock Rating: Outperform

Target: US$9.75

Endri Leno, [phone], [e-mail]

Associate: Andre Bodo, [phone], [e-mail] July 3, 2023

 DRI Healthcare Acquires Royalty in Breast Cancer Treatment OrserduTM (elacestrant)

DRI Healthcare announced (on June 30) that it acquired a royalty on the worldwide sales of Orserdu (elacestrant),

an orally administered breast cancer treatment. Orserdu was approved by the U.S. FDA in January 2023 and is under review for potential approval in the E.U. (decision expected in the NTM). While DRI has not disclosed a specific IRR, it maintains that this transaction is in the 10%-14% range that it usually targets – our estimates suggest it is closer to the higher end of the range.

Importantly, following the Orserdu transaction, DRI now expects flat to slightly growing cash receipts through 2030. This cash receipt guidance was initially provided following the TZIELD royalty acquisition; however, the portfolio needed replenishment following its sale (see note DRI Healthcare Sells The TZIELD Royalty At A Significant Premium). While we were not concerned about DRI reconfirming this guidance given its plentiful liquidity and robust pipeline, it is nevertheless important to see it re-achieved. DRI has another de

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And....DRI has another deal in late-stage due diligence, which, should it close, will very likely result in a firm guidance of growing cash receipts. Transaction Details Details of the transaction include 1) upfront purchase price of US$85 mln; 2) DRI to receive a mid-single digit tiered royalty on worldwide sales (we are assuming U.S. and E.U. countries in our forecasts); 3) an undisclosed