Harmony Biosciences Holdings, Inc.

HRMY Details

Harmony Biosciences Holdings, Inc. (NASDAQ: HRMY) is a commercial-stage pharmaceutical company focused on developing and commercializing groundbreaking therapies for patients living with unique neurological syndromes. HRMY currently generates commercial revenues from its medication named Pitolisant under the WAKIX brand, launched on November 01, 2019, to treat excessive daytime sleepiness (EDT) in adult patients with narcolepsy. HRMY common shares were listed on the exchange on August 21, 2020, at the issue price of USD 24. As of June 24, 2021, the company's market capitalization stood at USD 1.73 billion.

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

New Analysis Underscoring WAKIX’s Efficacy: On June 10, 2021, the company declared the new data point for WAKIX that reveals the magnitude of its medical efficacy for excessive daytime sleepiness (EDS) and cataplexy in individuals with narcolepsy.

Q1FY21 Results: The company reported a massive increase of 2x YoY in net product revenues to USD 59.67 million in Q1FY21 (ending 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 194.9 million.

Key Risks: The company is engaged in the commercialization of a single product, i.e., 'WAKIX'. If the company could not be able to increase its product portfolio in the future, which usually takes a long time, then excessive dependence on a single product could impact the company's financial strength in the future. Moreover, HTMY's top customers viz. CVS Caremark and Pantherx accounted for 73% and 88% of the gross product revenues during FY20 and FY19, respectively. Excessive dependence on certain customers for business could hurt the company's financial health in the future.

Outlook: In December 2020, HRMY presented an Investigational New Drug (IND) application to the FDA to evaluate Pitolisant in patients with myotonic dystrophy (DM). The IND started in January 2021 and HRMY initiated a Phase 2 trial in patients with DM in the first half of 2021.

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

Stock Recommendation: HRMY's share price has declined by 17.48% in the past six months and is currently trading at a 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 41.32. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 35.97. On the technical chart, the next support level is USD 25.70. Considering the company's product prospects, increasing commercial activity, improvement in profitability margins, current valuation, and associated risks, we recommend a "Speculative Buy" rating on the stock at the closing price of USD 30.10, down by 1.41% as of June 24, 2021.

*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 or if the price closes below the support level. 

Turning Point Brands, Inc.

TPB Details

Turning Point Brands, Inc. (NYSE: TPB) is a leading manufacturer and distributor of Other Tobacco Products (OTP) in the U.S. TPB offers a broad range of staple products with brands like Zig-Zag and Stokers to fulfill consumer preferences. The company operates in three segments 1) Zig-Zag Products, which includes rolling paper, tubes, finished cigars, and Make Your Own (MYO) wraps. 2) Stoker's Products, which comprises Moist Snuff Tobacco (MST) and loss leaf chewing tobacco products, and 3) NewGen Products, which markets cannabidiol isolate (CBD), liquid vapor products, and products without tobacco or nicotine. The company’s products are available in more than 210,000 retail outlets in North America and Canada. As of June 24, 2021, the company's market capitalization stood at USD 813.65 million.

Strategic agreements with Docklight Brands, Inc. (Docklight): On April 19, 2021, TPB announced its strategic investment of USD 8.7 million in Docklight, a leading consumer products company with Marley Natural cannabis and Marley CBD brands. The tobacco manufacturer has obtained U.S. distribution rights for Docklight's Marley CBD topical products as per the investment.

Q1FY21 Results: The company recorded an 18.69% increase in its net sales to USD 107.64 million in Q1FY21 (ending March 31, 2021) compared to USD 90.68 million in Q1FY20, driven by increased sales volume across all product segments, especially Zig-Zag Products. In addition, the company reported a 2.56x YoY increase in net income to USD 11.52 million in Q1FY21 compared to USD 4.49 million in Q1FY20. As of March 31, 2021, the tobacco producer stood at the cash and cash equivalents of USD 167.36 million with a total debt of 429.80 million. Moreover, TPB repurchased 119,031 shares for the total cost of USD 5.70 million, at an average price of USD 48.16 during Q1FY21.

US Focused Portfolio of Product Lines (Source: Investor Presentation, Q1FY21)

Key Risks: The operations of TPB are highly dependent on a small number of third-party suppliers and producers under long-term contracts. Any disruption in the relationship with the suppliers and producers, failure to renew the contracts, or uncovering any new supplier could significantly impact the company's ability to distribute its product volumes, resulting in a decline in its financial metrics.

Outlook: TPB estimates its FY21 sales to be between USD 422 million to USD 440 million, with an adjusted EBITDA to be in the range of USD 103 million to USD 108 million. For Q2FY21, the company expects its net sales to be between USD 103 million and USD 109 million.

Valuation Methodology: EV / EBITDA 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.

TPB Daily Technical Chart

Stock Recommendation: TPB's share price has declined by 14.78% in the past three months and is currently trading at a mid-band of the 52-week range of USD 23.58 to USD 61.08. The stock is currently trading between its 50 and 200 SMA levels, and its RSI Index is 49.47. We have valued the stock using the EV/EBITDA-based relative valuation methodology and arrived at a target price of USD 52.85. On the technical chart, the next support level is USD 37.62. Considering the company's robust track record, strategic investments, operating with large brands, current valuation, and associated risks, we recommend a "Speculative Buy" rating on the stock at the closing price of USD 44.28, up by 3.72% as of June 24, 2021.

*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 or if the price closes below the support level.

Disclaimer

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