TSX:DHT.UN - Post by User
Post by
retiredcfon Jun 24, 2024 9:41am
78 Views
Post# 36103038
RBC
RBCTheir upside scenario target is $26.00. GLTA
June 24, 2024
DRI Healthcare Trust
Orserdu deep dive - drug remains well-positioned
Outperform
TSX: DHT-U; CAD 15.13
Price Target CAD 20.00
Our view: Over the next 6-18 months, we expect data read-outs from a number of competitive products to key drug, Orserdu, which may support their approval in later 2025/2026. As such, we have prepared a deep-dive scenario analysis to assess risks/opportunities and believe these are being accurately discounted by the market with perhaps some minor degree of upside versus our outlook. While these data releases should be monitored, we remain buyers, especially in anticipation of future royalty purchases, which should further diversify the royalty asset portfolio.
Key points:
Deep dive on Orserdu (represents >30% of our gross NAV). In our view, there remains some concentration-related risk associated with a few DRI products, most notably Orserdu. Today, the drug contributes ~$6.75/sh, or >30%, to our estimated gross DRI NAV of $18.53, making it the single largest contributor to this metric. With this in mind, we have completed a “deep dive” on Orserdu in the metastatic breast cancer space (mBC), incorporating our competitive positioning thoughts on DRI value.
Key competitive data to be released over the next 6-18 months. We believe much of the positioning of Orserdu, and resultant royalties and milestones, will be ultimately informed by the release of Phase III pivotal data on competing drugs over the next several quarters through to the end of 2025. We have completed a review of these programs and noted the expected release dates of important data which start later this year.
Orserdu was a top 10 US launch in 2023. Orserdu was among the top 10 most successful launches out of the 84 drugs introduced in the US market in 2023, as tracked by IQVIA. We note drug sales and associated royalties and milestones payments have materially outperformed our early forecast.
Scenario analysis on Orserdu trajectory. Our base case calls for peak Orserdu sales of $510MM in 2025 with a subsequent decrease to $374MM by 2030 (60% probability) due to competition. In order to gauge the risk/ reward opportunity facing Orserdu we have also prepared three alternative scenarios. These include (i) continued modest growth (2.5%) post 2025 with sales climbing to ~$590MM by 2030 (15% probability), (ii) a negative scenario in which all drugs under development are considerably more efficacious and safer than Orserdu - peak sales of $475MM are reached in 2024 and decline to ~$190MM, or ~50% of our base case, by 2030 (20% probability) and (iii) a low-likelihood, upside case in which Orserdu sales reach >$1B, given other drugs face challenges, as was the case with Sanofi’s amcenestrant which was discontinued in Aug 2022 (5% probability).
Slight upside to valuation based on scenario analysis and weighting.
Utilizing the assigned probabilities to our valuation calculations for each scenario yields a value of $20.50/sh, or slightly higher than our unchanged current target price of $20.