Covalon Technologies Ltd. (OTC:CVALF)

Covalon Technologies Ltd. (TCOV.V) (OTC:CVALF) ($2.64; $72.2M market cap) announced it has retained Origin Merchant Partners as its financial and strategic advisor to evaluate shareholder value-enhancing opportunities:

"Our primary objectives are to accelerate the adoption of our products to benefit a larger patient population and to unlock the significant value we believe is inherent in our Company," said Amir Boloor, Executive Chair of Covalon.
"We believe Covalon is undervalued — trading at a mid-single-digit Adjusted EBITDA multiple compared to med-tech peers in Canada and the U.S., which typically trade at significantly higher multiples. This is despite the fact that we are making long-term investments and are not focused on near-term EBITDA optimization."

Mr. Boloor also stated that "the Company’s Advanced Wound Care segment, led by its collagen dressings, has grown more than 4x in the U.S. market over the past four years and contributed more than $10 million in Adjusted EBITDA on a standalone basis in our most recent fiscal year. We believe that we still have a runway to improve margins and profitability and to grow this business over a multi-year time horizon through market share expansion and the launch of new products."

"Our Vascular Access and Surgical Consumables segment—representing a smaller, but growing portion of our overall revenue today—has grown at a compound annual rate of over 50% in the U.S. market over the past three fiscal years, attracting some of the largest and most prestigious hospitals in the United States. This growth reflects the strong clinical value and differentiation of our products."

Key highlights:

• Retained Origin Merchant Partners as financial and strategic advisor.
• Exploring a wide range of strategic alternatives, including:
  • Joint ventures, partnerships, and acquisitions.
  • Mergers or mergers of equals.
  • In-licensing/out-licensing of products and IP.
  • Potential NASDAQ listing.
  • Stock buybacks using ~$18 million in net cash.
  • Potential spinoffs of Advanced Wound Care and Vascular Access segments.
• No assurance that any specific transaction will occur.
• No further updates will be provided unless required.

Covalon Technologies Ltd. is a patient-driven medical device company that provides innovative and cost-effective healthcare solutions for advanced wound care, infection control, and medical device coatings.

Covalon Technologies Ltd.  (TSXV:COV) (OTC:CVALF) ($2.06; $56.7M market cap) released a statement on the U.S / Canada trade dispute. There are two main takeaways from the release that seem to have the potential to offset possible negative impacts on any trade war:

• “Covalon has manufacturing and commercial operations on both sides of the Canada – United States border. Depending on the specific regulations that will in due course be published, Covalon has the flexibility to adjust manufacturing processes and locations that could mitigate negative financial implications to the Company.

• “Almost all of Covalon’s revenues are in US Dollars, and the majority of its costs are in Canadian dollars. There has been, and will likely continue to be, foreign exchange benefit to the company. The current exchange rate of 1.45 in Canadian Dollars to the US Dollar compares with the exchange rate a year ago of 1.35.”

In our 11/6/2024 Open Forum, we added the stock as a Focus Stock of the Month, not too long after having had the chance to speak with management for the first time, in a September 2024 Fireside.

Covalon is a patient-driven medical device company that provides innovative and cost-effective healthcare solutions for advanced wound care, infection control, and medical device coatings

Covalon Technologies Ltd.  (COV).V (OTC:CVALF) ($2.02; $49.8M market cap) reported Q3 2024 results: (financial in CAD)

• Sales of $9.2 million vs $6.0 million in the prior year
• EPS of $0.06 vs a loss of $0.02 .

“We delivered a very successful Q3 – solid performance on growth, margins and operating expenses all led to another strong quarter of profitability,” said Brent Ashton, Covalon’s Chief Executive Officer. “Our results clearly demonstrate the progress that the One Covalon team is making against our key priorities, and that the foundational work to strengthen Covalon is delivering value to our customers, stakeholders, and investors.”

We were on the conference call, and while management did not provide any specific guidance, the tone suggested that Q4 should continue the growth pattern seen in the last several quarters. After a string of quarterly losses, this marks the second consecutive quarter of strong profitability, as a new CEO’s plan to focus on the company’s highest growth and margin areas of the business seems to be inflecting. We are in the process of scheduling a Fireside Chat Skull Session with the CEO.

Covalon is a patient-driven medical device company that provides innovative and cost-effective healthcare solutions for advanced wound care, infection control, and medical device coatings.