Earnings MondayWhat to expect?
I think the comp from last year Q1 2019 as a baseline for Q1 2020, with adjusted revenue of 17.1 million, adjusted ebitda of 5.1 million.
Blexten and Cambia will have grown about 30% y/y roughly (Blexten higher, Cambia a bit lower), Pensaid maybe a decline of 5-7%. Who knows about the other Aralez line. Plus the cost synergy of the 7 million annualized savings. So 1.75 million add back.
Looking at the Vimovo US royalty for 2019 vs 2020, situation changes with at risk generic entry in market - minimum payment vs % of net sales depending on market penetration of generic. Listed at 2.4 million CAD/ quarter Q1 2019 vs 10% of net sales from Horizon in 2020. Horizon quotes vimovo net sales 19.4 million for Q1. So 1.94 million USD / an estimated 0.75 USDCAD average (lower if including march's huge drop) = 2.58 million CAD from the 10% royalty only). Let's just say they'll be about the same even though slight
7 million adjusted ebitda would be a reasonable anchor given the step up from cost savings, assuming no material increase from blexten and cambia (likely they contributed something more over Q1), and the rest of the business stayed flat.
Technically the stock seems to want to run higher when it breaks somewhere in the 65 cent range. Upward resistance around 1-1.20.
I think the stock runs higher on continued good financial performance, any stalling on penetration from Dr Reddy's on Vimovo US, a Resultz US deal, sales of Suvexx.
Suvexx could likely get to Cambia like sales but faster given the existing pipeline, so 10 million sales with 50% margin contribution estimated within two years. Likely some synergy there as well.
Resultz deal they'll probably get 5 million up front, plus a mid teens royalty in 10% conservatively of a 400 million US lice market. Plus some kind of margin for producing Resultz and selling it to their distributor.
Bloom Burton is calling for 2020 adjusted ebita of 20 million and 2021 adjusted ebitda of 25 million.
I think those numbers are low given the above scenarios, even if vimovo US royalty goes to zero - which it won't right away. They'll get something for Q2 for vimovo US. Assuming DRL takes 50% of sales in Q2, unlikely, they'll still get about 850k I estimate, based on trailing annual Vimovo US sales of 51 million, 10% of that in a quarterly chunk, at 50% sales reduction. I've heard a rumor that Dr Reddy's Vimovo isn't significantly discounted and may not have significant penetration, but let's take the base case at that. Q2 they also get the Takeda 2 million US payment on the books, 2.8 million CAD at these prices. Assuming NO growth from Blexten and Cambia y/y, Q2 is looking like 9.5 million adjusted ebita. That puts the company on pace to blow past the 2020 estimate by by Bloom Burton of 20 million.
A Resultz deal this year would materially add to that, plus any sales from Suvexx.
What kind of multiple could you put on ebitda? Given they bought Aralez for about 7x, that seems like a fair multiple. Ok, let's use the bloom burton model of 25 million ebitda for 2021. Bloom burton uses a 6 x multiple and gets a valuation of 2.30 cents per share.
I'd be happy buying at 80 cents and getting 2.30. Given that ebitda could be much higher, and afford a higher multiple than 6x - I'd be happy with 7x - and debt gets paid down which accrues in the EV calculation to the equity holder, the stock price should be much higher than that IMO.
Good luck to all!