Roth Capital Partners has upgraded QLT (NASDAQ:QLTI; TSX:QLT) to “buy” from “neutral” and raised its price target to $5.50 from $4.50, following the proposed acquisition of InSite Vision (OTC:INSV). The stock closed at $3.99 on Monday.
“We believe that QLT’s financial resources could unlock the value in this emerging eye care company,” writes analyst Scott Henry, adding that “we now view QLT as a sustainable ophthalmology company that could have increased enterprise value.”
Mr. Henry figures the InSite ophthalmology pipeline is considerably undervalued, which he attributes to its financial distress. This pipeline includes the soon to be filed BromSite for post-op inflammation, a potential 2016 filing for DexaSite to treat blepharitis, and multiple earlier stage compounds.
InSite developed the marketed drug, AzaSite, which validates its delivery technology. “QLT is paying (in shares) about $25-million for what we believe could be $75-million to $100-million in assets,” he added.
In another value creating move, he said QLT is also investing $45-million in Aralez Pharmaceuticals, a spec pharm company that is being created with the combination of Tribute Pharmaceuticals and Pozen, and will be spun out to investors.
He said Pozen shares increased about 18% on the event. “A similar return on QLT’s investment could produce value creation in the $10-million range for shareholders, by our calculation,” he added.
