Tilray, Inc.

TLRY Details

Tilray, Inc. (NASDAQ: TLRY) is a worldwide cannabis lifestyle and consumer packaged goods firm with operations in Canada, the US, Europe, Australia, and Latin America. These are the geographies where cannabis or hemp-derived cannabinoids are legal and are permitted under federal and local laws. TLRY currently provides medical cannabis products to several thousands of patients in through its subsidiaries.

Delivery of medical cannabis grown in Germany: Aphria RX GmbH, a wholly-owned subsidiary of TLRY, stated on June 7, 2021, that it had completed its first successful harvest of medicinal cannabis grown in Germany. Before enacting Germany's Cannabis as Medicines Act in March 2017, the country had to rely only on imports to fulfill the rising medical demand, estimated to be well over 100,000 patients. Tilray's continuous local harvest and manufacturing will be critical in ensuring patient requirements while also minimizing reliance on imported supplies.

Creation of New Tilray: Tilray Inc. (Tilray) and Aphria Inc. (Aphria), producer and distributor of medicinal and recreational cannabis in Canada, completed their previously announced business combination on May 3, 2021. The combined company will operate as Tilray with the industry's largest worldwide geographic footprint. Based on the closing stock prices on April 30, 2021, the merged business had a market capitalization of about USD 8.2 billion.

On April 28, 2021, Tilray altered its fiscal year from December 31 to May 31 to align it with that of Aphria Inc. In the future, Tilray will publish quarterly reports based on the May 31 fiscal year-end.

Pro-Forma combined 9MFY21 Results: The company recorded the Pro-forma combined revenue of USD 522.01 million during 9MFY21 (ended February 28, 2021) by combining the Aphria 9M financials (ended February 28, 2021) with Tilray constructed 9M financials (ended December 31, 2020). The company reported a combined operating loss of USD 255.55 million, resulting in a net loss of USD 490.40 million.

Key Risks: Significant regulations on marketing, branding, product forms, product composition, packaging, and distribution methods are and will be imposed by The Cannabis Act and the accompanying regulations (CR), which may lower the value of some of the goods represented by TLRY or might hinder the company's ability to compete in the adult-use cannabis market in Canada.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

• % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

TLRY Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: TLRY’s share price has declined 30.50% in the past six months and is currently trading in the lower-band of the 52-week range of USD 4.41 to USD 67.00. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is 27.12. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 16.99. Considering the company's market dominance, strategic acquisitions, current valuation, and associated risks, we recommend a "Speculative Buy" rating on the stock at the current price of USD 13.69, down 1.58% as of July 19, 2021, 02:43 PM ET.

*All forecasted figures and Industry Information have been taken from REFINITIV.

*The reference data in this report has been partly sourced from REFINITIV.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

Harmony Biosciences Holdings, Inc.

HRMY Details

Harmony Biosciences Holdings, Inc. (NASDAQ: HRMY) is a commercial-stage pharmaceutical firm dedicated to discovering and commercializing novel treatments for patients suffering from rare neurological disorders. HRMY presently derives income from Pitolisant, a drug sold under the WAKIX brand that was introduced on November 1, 2019, to treat excessive daytime sleepiness (EDT) in adult narcolepsy patients. On August 21, 2020, HRMY common shares were listed on the exchange at USD 24.

Multiple Opportunities for Pitolisant (Source: Q1FY21 Presentation, May 11, 2021)

Initiating Phase 2 trials in Myotonic Dystrophy: On June 29, 2021, HRMY announced the initiation of phase 2 clinical trials to evaluate the safety and efficacy of Pitolisant in adult patients with type 1 Myotonic Dystrophy (DM1), a genetically inherited form of adult-onset muscular dystrophy. The company expects the topline results from the phase 2 trials in Q2FY22.

New Analysis Underscoring WAKIX’s Efficacy: HRMY announced a new data point for WAKIX on June 10, 2021, revealing the extent of the drug's medical effectiveness for excessive daytime sleepiness (EDS) and cataplexy in people with narcolepsy.

Q1FY21 Results: The company reported a massive increase of 2x YoY in net product revenues to USD 59.67 million in Q1FY21 (ended March 31, 2021) compared to USD 19.84 million in Q1FY20, due to growing commercial sales of WAKIX, which was launched on November 01, 2019. The company reported a significant increase in net income to USD 7.38 million in Q1FY21 compared to the loss incurred of USD 38.62 million in Q1FY20. As of March 31, 2020, the company stood with cash and cash equivalents of USD 141.16 million with a total debt of USD 194.90 million.

Key Risks: HRMY is focused on the marketing of a single product, namely 'WAKIX.' If the company cannot expand its product range in the future, which usually takes time, then over-reliance on a single product may hurt the company's financial strength. Furthermore, during FY20 and FY19, HRMY's significant clients CVS Caremark and Pantherx contributed 73% and 88% of gross product revenues, respectively. Therefore, excessive reliance on certain clients for business might be detrimental to the company's financial health in the long run.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

• % Premium/(Discount) is based on our assessment of the company's FY21E trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

HRMY Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: HRMY's share price has declined by 29.59% in the past nine months and is currently trading in the lower band of the 52-week range of USD 25.46 to USD 52.74. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is 26.33. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 33.45. Considering the company's growth prospects, increase in commercial activity, improvement in earning margins, current valuation, and associated risks, we recommend a "Speculative Buy" rating on the stock at the current price of USD 27.45, down 2.13% as of July 19, 2021, 1:36 PM ET.

*All forecasted figures and Industry Information have been taken from REFINITIV.

*The reference data in this report has been partly sourced from REFINITIV.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

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