Theratechologies’ ibalizumab deal gets thumbs up Euro Pacific Canada

Euro Pacific Canada analyst Doug Loe says he sees the potential for “strong upside” from Theratechnologies (Theratechnologies Stock Quote, Chart, News: TSX:TH) most recent deal.

On Friday, Theratechnologies announced it had signed a 12-year distribution agreement to market and distribute HIV treatment ibalizumab in the United States and in Canada.

“Ibalizumab represents a perfect fit for our organization,” said CEO Luc Tanguay. “It is a niche, breakthrough treatment for multidrug-resistant HIV patients. These individuals are followed by the same physicians that treat patients suffering from HIV-associated lipodystrophy. Ibalizumab fits very well within our existing commercial infrastructure, as we can leverage our sales force, our medical science liaison team as well as our managed markets group and call centre. This is the type of products we want to add to our portfolio as they hold the potential to generate additional revenues while keeping focused on our core business.”

Loe says the muted market response Friday, a day when Theratech’s stock was up just nine cents, surprised him. He says he sees the potential for strong upside if ibalizumab can perform well in Phase III drug-resistant HIV-1 testing, as previously published Phase I/II data suggests it could.

“(The) initial market response was disconnected from our own positive views on ibalizumab’s medical prospects,” says Loe. “Capital markets initially responded to the transaction with a collective yawn before responding more favourably to the new pipeline addition and we believe the end-of-day upsurge was both appropriate and more consistent with our own views on transaction quality and ibalizumab’s longterm revenue prospects. Since the drug is still a Phase III-stage asset, though with data from two separate studies poised to generate six-month viral load reduction data by end-of-C2016, we will comment on ibalizumab’s medical attractiveness and economic prospects more qualitatively while maintaining our BUY rating and PT of $3.50, and in so doing, deriving our TH valuation and revenue/EBITDA projections solely from already-approved Egrifta sales for now.”

Loe’s one-year $3.50 price target implied a return of 148.2 per cent at the time of publication.