Good article from Stockhouse on QLT.
Toronto, ONT, October 20 /SHfn -- The outlook for QLT Inc. [T.QLT] is as easy as 1-2-3-4. Those numbers are the approximate expected earnings per share of the company for the next 4 years. Earnings per share are expected to jump from approximately break-even this year to close to $1 next, and then $2, $3 and $4 to follow, an excellent long-term growth projection through 2004.
This stellar growth prospect is based on sales of Visudyne, the company's new drug that treats serious eye disease, and now forms the bulk of the company's revenues and profits. Visudyne sales were US$31 million this past quarter, and the company is expecting fourth quarter sales to be $40 to $46 million. For next year, sales are projected to be in the $270 million range. With that kind of progression investors will be able to clearly see profits, even without being a patient.
QLT Inc. is a biotech company with a long Canadian history of success in photodynamic, or light activated, therapy, based on its original drug Photofrin. The sale in June of the Photofrin rights to Axcan Pharma in order to concentrate on Visudyne has started to pay off already. On Oct. 17, QLT reported its first profitable quarter ever, as sales began to grow dramatically. The company is poised to grow by about 100% through 2002. The stock trades at discount valuations based on this growth, and also trades at a discount to its peer group.
Visudyne is the first approved drug therapy for the treatment of AMD (age-related macular degeneration), a disease affecting 500,000 new patients worldwide each year. AMD is the leading cause of blindness in patients over 50 in North America. The drug is currently being marketed in 22 countries, including the U.S. and Canada, and most of the major European countries will have approved its usage by year-end, with the remaining ones doing so early in the New Year.
If we compare QLT to other biotech companies that will turn profitable over the same time frame, we see that QLT has a higher growth rate, and trades at a lower multiple than any of them.
A lot of uncertainty surrounds American physician reimbursement. Doctors will not prescribe any drug until they are sure they are going to get reimbursed by the states, since they dispense it directly. The 3 major states that were delaying payment, Ohio, Texas, and Florida, are now reimbursing their doctors. A national policy regarding reimbursement should be finalized in the next couple of months.
QLT intends to apply for wider applications for Visudyne for different types of patients and various forms of the disease. They are also pursuing drugs to be used on other ocular conditions, characterized by rheumatoid arthritis, restenosis, skin cancer and psoriasis.
Given that there are not many profitable biotech companies, and Canadian ones are even scarcer, QLT could become a must-own over the next several years for Canadian institutions.
If we compare QLT to other biotech companies that will turn profitable over the same time frame, we see that QLT has a higher growth rate, and trades at a lower multiple than any of them. The comparables, Immunex [IMNX] and Medimmune [MEDI], trade at over 50x 2002 earnings, with 25% to 30% average growth rates. QLT is at a 20% discount to that and will grow at 100% through that same time period.
Given that there are not many profitable biotech companies, and Canadian ones are even scarcer, QLT could become a must-own over the next several years for Canadian institutions.
The risk in owning this stock is mostly market risk. QLT is affected by the general tech area, and goes up or down pretty well in sympathy with NASDAQ. Also, since it is highly dependent on Visudyne, the risk is that there will be slower adaptation of the drug than is currently expected.
Turn these risks around and the stock represents excellent upside potential due to a discount being placed on the company for this uncertainty. The stock represents a 50% return in the short-term if it just retraces its steps to its recent highs. With continued good results from Visudyne sales, investors will clearly see the rewards.
Bruce Campbell is an Oakville, Ontario-based portfolio manager with more than 20 years of experience in managing stock portfolios for various pension fund, institutional and individual investors |
