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Theratechnologies and Aurinia top healthcare picks for 2017 at Mackie Research

Byron Capital analyst Douglas Loe says he ascribes virtually no value to the Canadian HIV market, so yesterday's decision has no impact on his valuation of Theratechnologies. But Loe says the decision is typical of the regulatory challenges Theratech has had in other, more important markets.
Byron Capital analyst Douglas Loe says he ascribes virtually no value to the Canadian HIV market, so yesterday's decision has no impact on his valuation of Theratechnologies. But Loe says the decision is typical of the regulatory challenges Theratech has had in other, more important markets.
Byron Capital analyst Douglas Loe says he ascribes virtually no value to the Canadian HIV market, so yesterday’s decision has no impact on his valuation of Theratechnologies. But Loe says the decision is typical of the regulatory challenges Theratech has had in other, more important markets.

His top picks for 2016, Intellipharmaceutics (Intellipharmaceutics Stock Quote, Chart, News: Nasdaq: IPCI) and Knight Therapeutics (Knight Therapeutics Stock Quote, Chart, News: TSX: GUD) returned 35.4 per cent and 39.1 per cent, respectively, in a year that was historically tough.

Now, Mackie Research Capital analyst André Uddin has revealed his top two picks for 2017. Once again, the analyst’s top picks include a Canadian company listed in the U.S. and one listed in Canada.

Uddin’s top healthcare picks for 2017 are Victoria-based Aurinia Pharmaceuticals (Aurinia Pharmaceuticals Stock Quote, Chart, News: Nasdaq: AUPH) and Montreal-based Theratechnologies (Theratechnologies Stock Quote, Chart, News: TSX:TH).

Uddin says Aurinia, a late-stage pharma focused on one drug candidate (Voclosporin, for the treatment of lupus nephritis) has a management “dream team” that is steering a catalyst driven stock.

“Based on the clinical data, market potential of Voclosporin, lack of late-stage competitors and historical track record of management, we believe AUPH has the potential to be acquired,” says the analyst.

Uddin has a “Buy” rating and a one-year price target of $8.00 on Aurinia, a price that implied a return of 216 per cent at the time of publication.

Quebec-based Theratechnologies already has one commercialized product, Egrifta. Egrifta was approved by the FDA in 2010 to treat HIV-induced lipodystrophy. A second product, ibalizumab, a novel CD4-directed HIV entry-inhibitor, is expected to be filed for approval shortly. Uddin thinks could be a real catalyst for Theratech.

“We believe there are some catalyst trades around ibalizumab in 2017 investors should not miss,” says the analyst. “TH is expected to file BLA to FDA in Q1 2017. Ibalizumab has FDA Breakthrough designation which could shorten the review time to 6 months compared to regular 10 months. We anticipate FDA to approve it in mid CY2017 and launch time in H2 CY2017. These catalysts should help drive TH.”

Uddin has a “Buy” rating and a one-year price target of $7.60 on Theratechnologies, implying a return of 144 per cent at the time of publication.

Uddin warns that his top picks will not have the sector wind at their back and that 2017 could, in fact, be another tough year for healthcare stocks, especially as we enter the back half of the year.

“2017 is likely going to be even tougher to find the right stocks to own, especially in the H2 of 2017,” he says. “We believe another decline could occur later this year. Declines occur in at least two waves and we saw the first one in 2015/2016. We recommend investors be hedged with put options going into the fall. Trump’s key policy is to bring back jobs, thus targeting U.S. drug manufacturing, he will also be going after drug pricing and repatriation of cash. We believe investors should focus on companies with disruptive technologies, clean balance sheets, robust pipelines, late-stage assets and/or innovative products being launched or close to be launched. Investors should continue to avoid most specialty pharmas with legacy assets as many lack long-term growth, have overpaid for weak assets and now are filled with debt.”

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About The Author /

Cantech Letter founder and editor Nick Waddell has lived in five Canadian provinces and is proud of his country's often overlooked contributions to the world of science and technology. Waddell takes a regular shift on the Canadian media circuit, making appearances on CTV, CBC and BNN, and contributing to publications such as Canadian Business and Business Insider.

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