BTIG starts Valeritas Holdings at buy; PT $1

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BTIG initiated coverage of Valeritas Holdings (NASDAQ:VLRX) with a “buy” rating and price target of $1. The stock closed at 39 cents on Dec. 3.

Valeritas sells V-Go, the only pump on the market for Type 2 diabetes patients, and there are numerous publications on its clinical benefits, including lower A1C and reduced insulin needs, writes analyst Dr. Sean Lavin.

“We like the simple design of the technology, the low cost, and demonstrated clinical benefits for patients,” he said. “In our view, Valeritas is in the best shape since it launched V-Go in 2012.”

While a recent financing included many warrants, Dr. Lavin said the company’s capital needs are largely met for the next two-to-three years, the selling strategy is gaining momentum and less productive salespeople are no longer with the company. In addition, gross margins are expanding and there should be a near-term sales force expansion.

Still, Valeritas shares have suffered during the last year as the funding overhang clouded strong revenue results, Dr. Lavin said. Though significant dilution from the stock and warrant financing is a concern and the space is competitive, “we think 30%-plus year-over-year sales growth deserves a higher multiple than the current less than 2 times multiple of revenue over the next 12 months.”

Stephen Kilmer