Small Caps to Watch DRI Healthcare Trust reported higher revenue and trimmed its loss for the first quarter ended March 31.
After markets closed on Monday, the trust reported revenue of $44-million, up from $42-million a year earlier. Its net loss was $1.7-million or 43 cents per share versus a loss of $6.5-million or 47 cents a year ago.
Canaccord Genuity analyst Tania Armstrong-Whitworth said revenue was in line with her estimate of $44.2-million but below consensus of $46.1-million.
“A miss on Orserdu and Omidria royalty income was offset by higher-than-expected income across most other entitlements, and a licensing fee of $5-million related to Casgevy,” she wrote in a note, referring to some of the company’s brands. She has a “buy” and $20.50 price target on the stock.
As of March 31, the trust said its portfolio included 28 royalty streams on 21 products that address a variety of therapeutic areas, such as oncology, neurology, ophthalmology, endocrinology, hematology, dermatology, lysosomal storage disorders and immunology.
The trust also announced agreements to terminate the existing management agreement with DRI Capital and allow DHT to internalize the investment management function.
CEO and chairman Gary Collins described it as an “evolutionary step forward” that will align interests and transparency for stakeholders and generate value for unitholders.
“We have a robust pipeline backed by a portfolio that continues to increase and produce significant returns. At the same time, we will opportunistically allocate capital towards unit buybacks via our renewed normal course issuer bid to ensure accretive value generation on a per unit basis,” he stated.
The company will pay $49-million in cash to end the management agreement and all management and performance fee obligations, and to acquire all the relevant assets of DRI Capital.
Ms. Armstrong-Whitworth said in her note that the transaction will deliver $200-million in cumulative savings over 10 years, based on DRI Capital’s projections of future management and performance fees.
In a note, National Bank Financial analyst Zachary Evershed described the “swift conclusion to negotiations” as “favourable.” He increased his target to $18.50 from $18 after the earnings and the announcement about the management agreement changes.
“With confidence in the trust’s growth prospects and internalization heralding a new era, we reiterate our outperform rating and DHT as one of our top three picks for 2025,” he wrote.
In the past 52 weeks, the units have traded between a high of $16.31 and a low of $10.42.