Valeritas Holdings, Inc. (NASDAQ: VLRX) is a commercial-stage medical technology company focused on improving health and simplifying life for people with diabetes by developing and commercializing innovative technologies. Valeritas’ flagship product, V-Go® Wearable Insulin Delivery device, is a simple, affordable, all-in-one basal-bolus insulin delivery option for patients with diabetes that is worn like a patch and can eliminate the need for taking multiple daily shots.
The company’ shares continue to zoom backed by the favorable impact of its recent announcements and the growing popularity of its lead product, i.e. V-Go®. On Oct 2nd, the company presented positive clinical and economic outcomes for V-Go compared to standard multiple daily injections (MDI) insulin therapy for treating people with type 2 diabetes. The results were presented at the 54th Annual Meeting of the European Association for the Study of Diabetes (EASD) in Berlin, Germany.
Investment highlights – Rapidly Ramping Revenue & Poised for Significant Value Creation.
The management believes that V-Go has the potential to one day become the insulin delivery method of choice for millions of patients with type 2 diabetes and that the revenue potential for Valeritas is substantial.
More recently, On October 10th, the company announced that Persistent Use of Valeritas’ V-Go® Wearable Insulin Delivery Device Demonstrates Significant Clinical & Economic Benefits Compared to Conventional Insulin Delivery in Patients with Type 2 Diabetes.
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We are very encouraged with both the clinical and economic benefits patients experienced in our study while utilizing V-Go to manage their diabetes,” said Beverly Everitt, APRN, MSN, CDE, BC-ADM, lead author and investigator from Endocrinology Consultants, Virginia Beach, Virginia. “In my opinion, great consideration should be given to the use of V-Go for the management of patients requiring insulin therapy, given the improvements over conventional insulin delivery in glycemic control and economic outcomes.”
Before this on 7th August, the company announced its financial results and business update for the second quarter ended June 30, 2018.
Second Quarter 2018 Highlights:
- Revenues in the second quarter grew 36% year-over-year to $6.5 million;
- Total and new prescriptions for the second quarter in the Company’s targeted accounts grew 22% and 18% year-over-year, respectively.
- Gross margin increased to 47.6% during the second quarter of 2018, an increase of nearly ten percentage points compared to 37.7% in the second quarter of 2017.
- Signed exclusive agreements for the distribution of V-Go in Austria and Germany.
- Presented additional strong data demonstrating the effectiveness and economic benefits of V-Go for people with type 2 diabetes at several major scientific meetings.
- V-Go was added to the Cigna HealthSpring Part D Plan.
Management’ Guidance: The Company expects 2018 revenue to be between $26 and $28 million. The Company also expects quarterly gross margin to increase on both an annual and sequential basis in 2018, ending the year with a gross margin above 50% for the fourth quarter of 2018. These expectations are based on, among other things, the assumption there will be continued growth in the Company’s targeted accounts and no sequential decline in the Company’s non-targeted accounts.
Robust Pipeline to Drive Long-Term Growth – V-Go® is a platform with the potential to disrupt diabetes & insulin markets
Per www.marketbeat.com, their average twelve-month price target is $3.75, suggesting that the stock has a possible upside of 175.74%. The high price target for VLRX is $4.00, and the low-price target for VLRX is $3.50. Considering all this, the company is in an extremely favorable risk-reward position, and value investors should consider exposure in this sector as the backdrop remains favorable.
Below are the excerpts of recent analyst rating on the script:
Industry Potential:15% share penetration generates ~$1.6B U.S. Opportunity
Quarterly Financial Results (in, thousands):
- Total revenue for the second quarter of 2018 was $6.5 million, a 36% increase from the second quarter of 2017 and a 7% sequential increase from the first quarter of 2018.
- The increase in the Company’s revenue was driven by strong prescription growth in the Company’s targeted territories. For the second quarter, total and new prescriptions in targeted accounts grew 22% and 18% year-over-year, respectively. The Company also experienced 8% year-over-year growth in new prescriptions and 5% sequential growth in total prescriptions in accounts that were not targeted by its sales representatives, which demonstrates the success of the Company’s cost-effective strategy of using a third-party inside sales team and contracted in-service visits.
- Gross profit in the second quarter of 2018 was $3.1 million, an increase of 71% versus $1.8 million in the same period in 2017. Gross margin increased by nearly ten percentage points to 47.6% versus 37.7% in the second quarter of 2017 due primarily to the increase in unit sales of V-Go, as well as an increase in V-Go’s net selling price and remained constant from the first quarter of 2018.
- Net loss in the second quarter of 2018 was $11.0 million, a decrease of 9% from $12.0 million in the second quarter of 2017, which was primarily due to improved gross margin.
Liquidity and financial flexibility –
- Total cash and cash equivalents were $33.0 million as of June 30, 2018, compared to $26.0 million on December 31, 2017.
- The increase in cash was due to the Company’s $26.8 million equity capital raise in April 2018 and an additional $3 million of common stock sold through the Company’s purchase agreement with Aspire Capital, offset by net cash used for operating activities.
Key risk factors and potential stock drivers:
- The company operation is still at an early stage, and it is yet to demonstrate stable track-record of growing sales and profitability. Therefore, VLRX’ ability to ramp up operations will continue to remain a long-term stock sensitivity factor.
- Notwithstanding the recent improvement in the operational and marketing profile of the company, VLRX is still a loss-making entity. Therefore, its ability to maintain liquidity and financial flexibility to fund its incremental capital requirements would remain a critical challenge for the company.
- VLRX operates in a very competitive and dynamic space and only time would differentiate between real winners and laggards. Some of its competitors may have longer operating histories and significantly greater resources than VLRX.
- As far as choosing an option with a relative advantage is concerned, VLRX is preferred choice with upside potential.
- On Monday, Oct 15th, 2018, VLRX was at $1.17 with volume of 718K shares exchanging hands. Market capitalization is $33.806 million. The current RSI is 45.39
- In the past 52 weeks, shares of VLRX have traded as low as $0.78 and as high as $6.79
- At $1.17, shares of VLRX are trading below its 50-day moving average (MA) at $1.26 and below its 200-day moving average (MA) at $2.02
- The present support and resistance levels for the stock are at $1.26 & $1.44 respectively.