QLTI: CIBC v. Leerink & Swan, looks like CIBC looses:"QLTI/Visudyne Poll IV Points To Changing Sentiment, Shares Downgraded To Hold
Leerink Swann & Company
Morning Meeting Note
October 4, 2000
Robert H. Uhl- (617) 918-4801
Navroze M. Alphonse- (617) 918-4838
QLT PhotoTherapeutics (QLTI - $63 15/16, NASDAQ) Hold
Visudyne Poll IV Points To Changing Sentiment, Shares Downgraded To Hold
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Financials: (extraordinary items not included)
Dec Year Year P/E 1Q 2Q 3Q 4Q REV($MM)
2000E Current ($0.20) NM ($0.13) ($0.01)A ($0.05) ($0.02) $23.8
Previous ($0.18) NM ($0.13) ($0.01)A ($0.05) $0.01 $27.2
2001E Current $0.20 NM ($0.01) $0.03 $0.06 $0.13 $86.2
Previous $0.50 NM NA NA NA NA $128.6
2002E Current $0.59 108X NA NA NA NA $135.6
Previous $1.20 53X NA NA NA NA $216.5
52 Wk. Price Range: $20-86 Market Cap: $4.2B
Avg. Daily Vol.: 975K
Shares Outstanding: 66.2MM Float: 50.3M
Short Interest: 1.4M
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We have conducted another poll of our MEDACorp consultants, 40 retina
specialists with practice size ranging from 180 to 11,000 patients seen per
year. Our consultants believe that approximately 16-17% of the wet AMD patients
that they see are candidates for Visudyne treatment, and that this penetration
rate could grow to 19-20%. This differs significantly from all three of our
previous polls, which indicated utilization rates between 26-27%. The change in
our consultant opinions regarding utilization rates forces us to lower our
end-user Visudyne revenue projections to $96 million, $206 million, $287
million, and $353 million in 2000-2003, respectively, compared to our previous
$108 million, $309 million, $458 million, and $563 million. The result is a
marked decrease in our bottom line estimates to a loss per share of $0.20 in
2000, $0.02 deeper than our previous estimate, and EPS of $0.20, $0.59, and
$0.79 in 2001-2003, respectively, compared to our previous $0.50, $1.20, and
$1.55. We are downgrading our rating to Hold from Speculative Buy.
Additional insights from our poll include: 1) Treatments may not be increasing
at the rate we had previously anticipated; 30% of our polled consultants said
that they anticipate weekly treatments increasing; 30% said they believed weekly
treatments would remain constant; and 10% said that they believe weekly
treatments would decrease. 2) The reimbursement environment remains unsettled.
While we believe this issue is well along the path to resolution, 31% of our
polled consultants believe that the reimbursement environment has gotten better,
46% believe it remains unchanged, and 23% believe that it has worsened. 3) The
retreatment rate is strong, nearly 80% according to our survey. 4) Visudyne
orders are increasing; 82% of the surveyed consultants regularly place orders
for Visudyne, this compares to 77% in our last poll.
Our consultants indicated that they are treating an average of 4 patients per
week, and they anticipate this average increasing to roughly 5 patients per
week. This is in line with our last poll, but considerably down from our second
poll, which suggested an average weekly treatment rate of 7 patients. Assuming
that there are 500 lasers placed in the U.S., 4 weeks in a month, and 11 working
months in the year, we could justify the following revenue run rate scenarios
from our surveys (see Figure 1). In Q2:00 QLT reported roughly $19.5 million in
U.S. Visudyne revenue, assuming that there were roughly 400 lasers placed in the
U.S. at that time, and that Visudyne was available for roughly 9 weeks in the
quarter, we arrive at a weekly number of procedures per laser of roughly 4.5.
Assuming that there will be 600 lasers placed in the U.S. in 2001 and 700 lasers
placed in 2002, our estimates imply procedure rates per laser of 4.9 in 2001
and 5.6 in 2002.
* Figure 1: Weekly Procedures and Run Rates
Poll IV Poll III Poll II Q2:00A 2001E 2002E
Current Prev Current Prev
Procedures/Wk 4.9 4.4 7.0 4.5 4.9 7.9 5.6 9.6
Total Procedures107,027 96,000 155,000 16,253 129,123 208,622 172,115 295,299
Run Rate ($MM) $128.43 $115.20 $186.00 $19.50 $154.95 $250.35 $206.54 $354.36
Source: Leerink Swann & Company/MEDACorp and company documents
Our Q3 estimates remain unchanged. We anticipate nearly $32 million in end-user
Visudyne sales in the quarter resulting in a loss per share of $0.05. We have
adjusted our out year end-user Visudyne estimates to account for the change in
sentiment among our consultants, and our estimates now call for U.S. market
penetration of 18%, 22%, and 25% in 2001-2003, respectively, down from 24%, 33%,
and 37%.
Comparing a few direct points from our current survey and our last survey (July
18, 2000) sheds some light on the changes in our consultant treatment patterns
(Figure 3). Seven of 23 consultants stated that weekly treatment levels have
been increasing, 6 said weekly treatments have been decreasing, and 10 indicated
a constant treatment level. The anticipated number of treatments per week has
grown marginally on an absolute basis, with 8 consultants seeing increases,
another 8 decreases, and 7 constant patient flow. However, we have seen strong
growth in the number of orders placed by these consultants, with 15 reporting an
increase and 7 remaining constant. Finally, the number of vials per order also
seems to be increasing on an absolute basis, 300 versus 202.
Our composite of profitable biotechnology companies currently trades at
approximately 86x 2001E EPS. Applying our new 2002 EPS estimate of $0.59 for QLT
to our previous valuation metric for the company, a forward multiple of 85x
2002E EPS, results in a share price of approximately $51 and we are downgrading
our rating to Hold from Speculative Buy. |
