Theratechnologies is a buy, Mackie Research says

Commenting on Theratechnologies’ (TSX:TH) second quarter financials, André Uddin of Mackie Research Capital says that despite sales from its two HIV-related drugs coming in a little lighter than his estimates, investors should expect long-term growth from the pharma company.

In a Thursday update to clients, Uddin reiterated his “Buy” recommendation and $19.50 target price for Theratechnologies, one of his Top Picks for 2018.

Montreal-based Theratechnologies issued its Q2 ended May 31, 2018, financials on Thursday, highlighting the company’s record net sales of $12.3 million, up 23.1 per cent from the same quarter last year. Sales of its HIV-related lipodystrophy drug Egrifta were up 11.2 per cent, while the first sales of its recently-approved in the United States multi-drug resistant HIV drug Trogarzo came in at $1.2 million.

“Although we are at a very early stage in the commercialization of Trogarzo in the U.S., we can appreciate the positive impact it is having on our bottom line,” says CEO Luc Tanguay in a press release. “Given the positive response from patients, physicians and payers, Trogarzo sales are gradually picking up steam and we should continue to observe the benefits of our new product to our results.”

Uddin says that the lower total revenues were paired with an Adj. EBITDA and fully diluted EPS that were in line with his projections. The analyst notes that TH recently paid pharma company EMD Serono US$23.85 million to buy out all of its remaining Egrifta obligations, a move that he calls a wise move, as it will likely improve TH’s bottom line immediately.

The analyst also highlights a currently conducted study by the Massachusetts General Hospital looking into the use of Egrifta to treat Non-Alcoholic Fatty Liver Disease (NAFLD) and Non-Alcoholic Steatosis Hepatosis, results which could indicate another revenue source connected to Egrifta.

“NAFLD and NASH are unmet medical needs and if positive could result in potential off-label sales expansion for the drug,” says Uddin. “While NAFLD can be benign, it can develop into a serious condition leading to liver failure. NASH is the most severe form of fatty liver disease and can cause significant damage to liver cells including liver cirrhosis.”

The analyst sees TH generating f.d. EPS of negative $0.03 on revenue of $61.6 million in 2018 and f.d. EPS of $0.98 on a topline of $274.5 million in 2019. Uddin notes that since initiating coverage of TH, shares of TH have delivered a 990 per cent total return. His $19.50 target represents a projected return of 58 per cent at the time of publication.