Innovus Pharma (INNV) Reaches a Positive Cash Flow & Issues Strong Outlook

Independent Analyst Suggest Price Target 150% Higher Than Current Levels Based on Strong Future Growth and Profitability

Innovus Pharmaceuticals Inc. (OTC: INNV) reported a robust second quarter with $1 million in revenue and positive operational cash flow of $256,000. In addition to exceeding Q2 estimates, the company issued revenue guidance of $5 million in FY16 that was well ahead of expectations for the year. SeeThruEquity analysts responded to the strong earnings and outlook by raising their price target to $1.00 per share – a 147% premium to the current market price.

In this article, we will take a closer look at the company’s robust second quarter performance, its strong outlook for the fully year, and SeeThruEquity’s expectation for a 147% jump.

Robust Q2 Performance

Innovus Pharma reported second quarter revenue that rose more than 400% to $1 million compared to $183,000 during the year ago period. Strong revenue from its Beyond Human acquisition was the primary driver behind the top-line growth, while Vesele®’s launch on the platform propelled its annual revenue to a $900,000 run rate. Management plans to launch its other product lines on the Beyond Human platform to add $3 to $5 million in annual revenue.

“We have exceeded our commercial expectations, and with the projected launch of Sensum+®, RecalMax™, and Xyralid® in the second half of 2016, we believe that revenues will continue to increase through the balance of 2016 and into 2017 and exceed our projections,” said Innovus Pharmaceuticals President & CEO Dr. Bassam Damaj.

The company also became cash flow positive well-ahead of its original timeline thanks to gross margins that improved 10% to 74% year over year. While the company reported a $4 million net loss on its income statement, this was largely attributable to non-cash changes in the fair value of derivative liabilities related to certain warrants and conversion features in its convertible debt and other financial instruments rather than its core business.

“Becoming operationally cash flow positive from the second quarter, and ahead of the timeline projected, is a major financial achievement for the company and a big step towards our projected profitability in 2017,” added Dr. Damaj.

Strong Outlook for FY16

Innovus Pharma surprised many investors by announcing that it intends to reach $5 million in sales for the full year, which is well ahead of its previous estimate of $3 million in revenue. These results are likely to be driven by the onboarding of Sensum+®, EjectDelay®, and other products to the Beyond Human platform, which reaches over 1,000 newspapers and magazines through an extensive marketing distribution channel.

The projections presumably do not include an FDA ANDA approval of FlutiCare™, which could easily become the company’s top-selling product. The nasal allergy spray has already generated millions of dollars as a leading prescription medication, which means that an over-the-counter approval could position it next to blockbuster products like GlaxoSmithKline’s (NYSE: GSK) Flonase – a drug that has surpassed $1 billion in total sales since its introduction.

The company raised $1.5 million in July and about $200,000 from the exercise of warrants, while registered warrants could provide another $1.2 million in cash. These financing sources should provide the company with ample funds to finance its growth as it targets $5 million in revenue for the year and a breakeven point next year.

Analyst Sees 147% Upside

SeeThruEquity raised its price target for Innovus Pharma to $1.00 per share on August 15 in a research update, citing the company’s recent results and guidance.

According to the analyst report:

In light of results and guidance that were ahead of our expectations we are raising our target for Innovus to $1.00. We see Innovus as a high-risk / high-reward investment opportunity in the OTC pharmaceuticals space with a differentiated business model focused on men and women’s health and vitality. If achieved, the price target of $1.00 reflects potential upside of 143.9% from the recent price of $0.41.

The analyst firm projects that revenues will grow from $5 million in FY16 to $14.7 million by FY17, while net income will swing from a $3.5 million loss in FY16 to a $1.6 million profit by FY17. When it comes to valuation, the firm anticipates that the stock will trade with an EV/EBITDA multiple of 14.2x and an EV/Revenue multiple of 2.2x by FY17. These estimates also reflect gross margins of just 64% by FY17 despite Q2 margins of more than 70%.

Investors can download the full research report on SeeThruEquity’s website: http://www.seethruequity.com/#!innv/c12jb.

Looking Ahead

Innovus Pharma reported a robust second quarter that exceeded analyst expectations by a wide margin. In response, SeeThruEquity analysts raised their price target to $1.00 per share, which represents a significant 147% premium to the current market price. Investors may want to take a closer look at the company as it continues to expand its organic revenue and prepares for a potential FDA ANDA approval of its FlutiCare™ product.

For more information, visit the company’s website at www.innovuspharma.com.