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Take a pass on Theratechnologies, Mackie Research says


An ad for Egrifta in San Francisco’s Castro District.
An ad for Egrifta in San Francisco’s Castro District.
Mackie Research analyst André Uddin says that the new acquisition by specialty pharma company Theratechnologies (Theratechnologies Stock Quote, Chart TSX:TH) will help diversify the company’s portfolio but will add to TH’s R&D expenses for the foreseeable future.

On Monday, Montreal-based Theratechnologies announced the acquisition of private, pre-clinical-stage cancer platform company Katana Biopharma in a $5.3-million deal. (All figures in US dollars unless noted otherwise.)

“Being involved in research and development and building a pipeline are essential to any specialty pharmaceutical company. The acquisition of Katana is part of our long-term growth strategy,” said Luc Tanguay, President and CEO of Theratechnologies, in a press release. “The fact that this is a platform we can develop and market ourselves is also a key feature of this transaction. This morning’s announcement is completely in line with our vision of where we want to take Theratechnologies.”

Uddin says that while it looks to be a fair deal structure, purchasing Katana will increase TH’s R&D, saying that a total of $5.0 million will be required to fund proof of concept trials for Katana’s two preclinical candidates.

The analyst says TH’s R&D expenses now go from $10.3 million in fiscal 2019 to $12.1 million and from $10.4 million in fiscal 2020 to $14.5 million.

“Today’s transaction marks TH’s branching out into the cancer field – which should diversify the company’s portfolio. TH’s short/middle-term goal is still focused on commercializing its HIV products – Trogarzo and Egrifta,” says Uddin in a client update on Monday.

The analyst’s target price is derived using a 12x EV/EBITDA multiple of his 2020 Adjusted EBITDA estimate and discounting back by 20 per cent. He is maintaining his “Hold” rating and dropping his price target from C$10.20 to C$9.60, representing a projected return of 17 per cent at the time of publication.

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About The Author /

Jayson is a writer, researcher and educator with a PhD in political philosophy from the University of Ottawa. His interests range from bioethics and innovations in the health sciences to governance, social justice and the history of ideas.
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