TSX:DHT.UN - Post by User
Post by
retiredcfon Mar 10, 2023 9:13am
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Post# 35330142
RBC Raise Target
RBC Raise TargetAnd their upside scenario target is now a triple from here.($22.00).
Outperform
TSX: DHT-U; CAD 7.40
Price Target CAD 16.00 ↑ 14.00
DRI Healthcare Trust
Attractive Tzield royalty transaction; raising price target to C$16
Our view: DRI announced an attractive royalty deal for diabetes drug Tzield (teplizumab-mzwv). We estimate an IRR of ~16% on this transaction based on the approved indication. We note that in a scenario with approvals in other geographies and indications, the estimated IRR on this transaction would be 20+%. As a result of this transaction, DRI has addressed the previously expected decline in cash royalties to 2030E. We have incorporated Tzield royalties in our model and have reflected updated consensus/RBC forecasts for the existing portfolio. As a result, we raise our price target to C$16 from C$14.
Key points:
Tzield royalty transaction. DRI announced an attractive royalty acquisition of Tzield (teplizumab-mzwv) for an upfront payment of $100MM and additional $100MM of potential milestone payments. Tzield is a biologic drug indicated to delay the onset of stage 3 type 1 diabetes in adults and pediatric patients aged 8 years and older who have stage 2 (at-risk) type 1 diabetes. Tzield is currently the only approved preventative treatment indicated for stage 2 type 1 diabetes patients. The drug is marketed by Provention Bio and Sanofi through a co-promotion agreement. Tzield is also being investigated in a Ph.III study of newly diagnosed stage 3 type 1 diabetes patients. Tzield is protected by patent and regulatory exclusivities until the end of 2034.
We estimate an IRR of ~16% in our base case estimate. In our base case, we incorporate royalties associated with US revenues of Tzield for at-risk patients. In this scenario, we do not expect DRI to make the milestone payments of up to $100MM in future years. We estimate an IRR of ~16% associated with the transaction, which we view positively given the several sub-12% deals last year and in light of the recent private placement where we estimate the cost of funding was ~12%. We note that in a scenario with approvals in other geographies and indications, the estimated IRR on this transaction would be 20+%. We note that the data readout of the Ph.III PROTECT trial will be important in this regard.
Cash receipts flat/increasing to 2030 vs. 2025 previously. After this transaction, we now expect cash royalties receipts in 2030E to be ~ $99MM (~$70MM previously), compared to ~$96MM of total cash receipts reported in 2022A (which included interest receipts of $5.4MM related to the CTI loan). As a result of this transaction, DRI has addressed the previously expected decline in cash royalties to 2030E.
Incorporating Tzield royalties. We incorporate Tzield royalties into our model and have reflected updated consensus/RBC forecasts for the existing portfolio. We currently model only royalties associated with the approved indications in the US. Tzield represents ~20% of our gross asset value. As a result of this transaction, we raise our price target to C$16 from C$14.