TSX:DHT.UN - Post Discussion
Post by
retiredcf on Nov 07, 2023 8:45am
RBC 2
Their upside scenario target is $24.00. GLTA
Outperform
TSX: DHT-U; CAD 11.40
Price Target CAD 18.00
DRI Healthcare Trust
Q3/23 Preview: Focus on updates related to the existing portfolio and the deal pipeline
Our view: Ahead of the Q3/23 results (AMC 13-November), we update our estimates to reflect changes to the outlook for assets held within DRI's portfolio. While we expect revenues, cash royalty receipts and adj. EBITDA to show y/y growth, the reported figures should be down sequentially due to the timing of cash royalty receipts (largely due to Zytiga royalty receipts which are paid semi-annually in Q2 and Q4). We would look for updates on the existing portfolio of royalties and the deal pipeline.
Key points:
Cash royalties and adj. EBITDA to report y/y growth but a sequential decline. We forecast total revenues of $28.4MM in Q3/23 (consensus at $27.5MM), adj. EBITDA of $18.1MM (consensus $21.8MM) and cash royalties receipts of $21.6MM in Q3/23 (up from $17.5MM in Q3/22 but down sequentially $27.1MM in Q2/23). The q/q decrease in cash royalties is largely due to Zytiga royalties that are received semi-annually, partially offset by contributions from the newer royalty streams. DRI is entitled to receive milestone payments based on the achievement of regulatory and sales performance thresholds for Orserdu. Given the EU approval of Orserdu, we expect DRI to receive a $1MM (RBCe) milestone payment.
Takeaways from Q3/23 results reported thus far. We highlight takeaways from companies that have reported Q3 earnings and where DRI has meaningful royalty exposure. For Vonjo (~20% of RBCe gross NAV), we note that SOBI (covered by RBC analyst Alistair Campbell) reported Q3/23 revenues that were below consensus (-2%) and RBCe (-7%). In our view, this could be due to transition as SOBI closed the acquisition of CTI. SOBI management, on the Q3/23 earnings call, noted smooth integration of the sales force and expects strong y/y growth for Vonjo next year. Regarding competition from GSK's recent approval of Ojjaara (momelotinib), SOBI management pointed to a strong dataset for Vonjo especially as it relates to the treatment of patients with low platelet count (below 50,000). For Orserdu (~32% of RBCe gross NAV), which is marketed by a subsidiary of a private company, data from Symphony Health and IQVIA suggest robust uptake of the drug. According to DRI management, it appears that Symphony Health is over-reporting while IQVIA is under-reporting actual revenues. Management remains confident in its guidance of at least $175MM in 2023 Orserdu revenues (RBCe: $186MM). See pg2 for additional commentary.
Focus on the deal pipeline. We expect the focus to be on the deal pipeline. DRI management recently noted a robust $3B pipeline of opportunities. In our view, DRI continues to enjoy a favourable deal environment for royalty transactions. There remains significant interest for royalty financing primarily due to the state of the public markets today. The company has also upsized of its debt capacity to $500MM. The increased debt capacity complements the equity raises completed earlier this year.
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