RVL Pharmaceuticals: A First ‘Look’ (NASDAQ:RVLP)

The most pathetic person in the world is some one who has sight but no vision.”― Helen Keller.

Today, we put RVL Pharmaceuticals plc (NASDAQ:RVLP) in the spotlight for the first time. This small ocular concern recently rolled out the first approved compound to treat low-lying eyelid in adults. The initial launch has produced some impressive revenue growth off a low base. Unfortunately, the company is burning cash and appears a long, long way off from become profitable. What’s ahead for 2023? An analysis follows below.

Company Overview:

RVL Pharmaceuticals plc is a New Jersey-based specialty pharmaceutical company. The company was formally known as Osmotica Pharmaceuticals plc before changing its name early this year. The firm is focused on the development and commercialization of pharmaceutical products that target markets with underserved patient populations in the ocular and medical aesthetics therapeutic areas. RVL Pharmaceuticals stock currently trades just above a buck a share and sports an approximate market capitalization of $100 million.

RVL Pharmaceuticals’ primary asset is a product called UPNEEQ or RVL-1201. This is an oxymetazoline hydrochloride ophthalmic solution, for the treatment of acquired blepharoptosis, or low-lying eyelid in adults. It is the first and only FDA-approved ophthalmic solution for this indication it should be noted. Osmotica Pharmaceuticals acquired the rights to UPNEEQ in 2017 from RevitaLid.

Third Quarter Results:

On November 10th, RVL Pharmaceuticals plc posted third quarter numbers. RVL had a GAAP loss of 16 cents a share even as revenues surged more than 350% on a year-over-year basis to slightly over $10 million. The was entirely due to UPNEEQ® net product sales growth, which was up 355% from 3Q2021 and 19% sequentially from the second quarter of this year. UPNEEQ entered the medical aesthetics market in the first quarter of 2021.

That pace of growth is projected to slow in the coming quarters. Management guided to $12 million to $14 million of revenues in Q4 which would represent 20% to 40% over levels in 4Q2021.

Analyst Commentary & Balance Sheet:

Since third quarter results were posted, Jefferies has initiated RVL Pharmaceuticals plc shares as a Hold with a $2.50 price target, while both Barclays ($3 price target) and H.C. Wainwright ($5 price target) have reiterated Buy ratings on the equity.

Less than one percent of the outstanding float is currently held short. The company ended the third quarter with nearly $60 million of cash and marketable securities on its balance after posting a quarterly loss from continuing operations of $14.4 million. This includes the nearly $44 million RVL raised in August. The firm has approximately $75 million in long-term debt.

Verdict:

The current analyst firm consensus is for a loss of 54 cents a share in FY2022 even as revenues to triple to just over $52 million. Losses are projected to narrow to 43 cents a share in FY2023 on sales growth of just north of 35%.

While UPNEEQ seems to be developing into a nice niche which leadership believes could eventually be a $2 billion market, it is hard to be too excited about RVL Pharmaceuticals’ near-term prospects. Even with the launch of an ecommerce channel in 2023 to fill out its multi-channel distribution strategy, sales growth should decelerate sharply in FY2023. The company’s marketing partner Santen has commenced the required registrational trial for UPNEEQ in Japan and plans to begin the same in China in 2023 as well.

More importantly, the company is going to continue to post substantial losses. Including its time when it was known as Osmotica Pharmaceuticals plc, the company has posted more than $500 million in cumulative losses. That would be more palatable if RVL Pharmaceuticals plc was approaching profitability and could use those net operating losses to offset taxes.

However, that does not appear to be the case for the foreseeable future. Outside a buyout, it is hard to see how RVL Pharmaceuticals plc avoids further dilutive capital raises. Given that, it is hard to see any compelling reason to own RVL Pharmaceuticals plc shares until management gets this firm much closer to cash breakeven status.

The visionary lies to himself, the liar only to others.”― Friedrich Nietzsche.