RBC ups QLT to “outperform”

Calling QLT’s litigation settlement with Massachusetts General Hospital over Visudyne royalties “better than we had anticipated,” RBC Capital Markets upgraded QLT to “outperform” from “sector perform” and raised its target price to $6 (U.S.) from $4.50. The stock (NASDAQ: QLTI; TSX: QLT) finished trading at $4.50 on Wednesday.

Analyst Doug Miehm writes that at the end of the third quarter, QLT had $194-million of cash, valued at $3.55 a share, with the upfront payment from the Eligard drug sale offsetting the announced settlement with MGH. At current levels, he said the market is ascribing only about 95 cents a share or $52-million in value to the rest of QLT’s assets.

“We believe the assets are worth materially more than this implied value, given that the cash flows remaining from the sale of Eligard are likely worth more than $100-million on a discounted basis, the company improved the economics related to Visudyne by re-acquiring the U.S. rights from Novartis, and the punctal plug program has some value even at its early stage.”

As a result, he figures the shares will likely “trade higher in the near-to mid-term.”

At Cormark Securities, analyst David Dean raised his price target to $5.35 (U.S.) from $2.65, saying he was impressed with the changes at QLT and, with the MGH lawsuit settled, “we once again find reason to value QLT’s cash.”