HLS Therapeutics Inc. (TSX: HLS) is a Canada based specialty pharmaceutical company which is focused on the acquisition and marketing of commercial-stage, late stage development and branded pharmaceutical drugs across the North American markets. 

Recently, the United States District Court for the District of Nevada's casted in favor Amarin Corporation plc's patent litigation against two generic filers for Amarin's VASCEPA. Thus, the Company losses its rights from the US market while it can continue its operations in the Canadian market.

Operational Highlights:

• In FY19, Health Canada approved for Vascepa, which is used to reduce the risk of cardiovascular events. The Company will initiate its launch across the Canadian market.
• The company informed that it has got medical device license for point-of-care blood testing medical device, named CSAN Pronto, from Health Canada.
• The company successfully acquired an exclusive license for the Canadian rights to PERSERIS, a novel product, used for the treatment of schizophrenia

FY19 Financial Highlights: HLS came up with its full-year results, wherein the company reported total revenue of US$ 54.16 million, stood lower than US$ 61.42 million in FY18, due to lower contribution from each of the segments. The company reported higher selling & marketing expense, increase in Medical, regulatory and patient support costs followed by general and administrative expense, while cost of sales remained lower than FY18. The company reported adjusted EBITDA of US$ 31.64 million, lower than FY18 of US$ 41.09 million. Net loss for the period stood lower at US$ 19.55 million, as compared to US$ 24.81 million in the previous corresponding period, supported by lower finance costs, which was partially offset by higher stock-based compensation and amortization and depreciation expense. The company reported a cash balance of US$ 47.08 million as on December 31, 2020.

FY19 Financial Highlights (Source: Company Reports)

Stock Recommendation: The stock of HLS generated a healthy return of ~22% in the last six-months; however, it has fallen by more than 28% on a year-to-date-basis as the restriction from the United States District Court, to sale its VASCEPA product across US has spoiled the investors’ sentiment. However, investors should note that the company can sell its product in the Canadian market without any hindrance. Also, Clozaril is still the market leader which is used for the treatment of schizophrenia. Moreover, the company also got license for its CSAN Pronto, and has got positive feedback from the healthcare community on it. Notably, the stock is quoting above its 200-day simple moving average (SMA) of CAD 18.03, implying investors’ confidence on the stock amidst current market volatility. Besides, the recent correction presents a good entry point. Combining the aforesaid facts, we believe the company remains well-positioned to drive meaningful growth in the coming quarters. Hence, we recommend a ‘Speculative Buy’ rating on the stock at the closing market price of CAD 18.40 as on 24 April 2020.

HLS One-Year Daily Price Chart (Source: Thomson Reuters)

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