Mackie Research maintains “Hold” rating on Theratechnologies

Positive new data for Theratechnologies’ (Theratechnologies Stock Quote, Chart TSX:TH) HIV treatment Trogarzo isn’t moving the needle for Mackie Research Capital analyst André Uddin.

On Friday, Theratech announced that new data presented at the 26th annual Conference on Retroviruses and Opportunistic Infections (CROI), showed that a Trogarzo injection maintained viral suppression at week 96.

“The increased efficacy of Trogarzo in patients susceptible to DTG compared to DTG resistant patients is an interesting finding as it supports an earlier intervention with Trogarzo in patients showing early signs of multidrug resistance,” said Dr. Christian Marsolais, senior vice-president and chief medical officer, Theratechnologies.

The analyst says Trogarzo has had a slower than expected launch in the United States, which caused him to lower his sales outlook on the drug back in January.

“Trogarzo prescription trends likely have to increase their rate of growth, otherwise near term street expectations could be revised down,” he says. “Multi-drug resistant HIV patients currently have very limited options – Trogarzo is one of them. The newly disclosed long-term data could potentially favor adoption of this drug for multi-drug resistant HIV patients.”

In a research update to clients today, Uddin maintained his “Hold” rating and one-year price target of $9.65 on Theratechnologies, implying a return of 26 per cent at the time of publication. The analyst notes the stock has returned 785 per cent since he initiated coverage of it.

Uddin thinks TH will post fully diluted EPS of $0.34 on revenue of $177.0-million in fiscal 2019. He expects those numbers will improve to EPS of $0.95 on a topline of $292.7-million the following year.

“Key risks to TH include: Current sales of Egrifta are from international markets, primarily the U.S. Fluctuation to the exchange rates between Canadian dollars and other currencies may significantly impact financial results,” the analyst adds. “Theratechnologies only has one Egrifta manufacturer – the company is building six months worth of Egrifta inventory and is looking to add a second manufacturer. Theratechnologies derives all of its revenues and its future profits from Egrifta – any disruption from these revenues would have a material impact on the company. Under the terms of the EMD Serono Termination Agreement, EMD Serono was granted a security interest over all of Egrifta-related assets. If Theratechnologies in breaches the agreement by failing to meet our payment obligations, EMD Serono has the right to seize all of Egrifta assets. We are unsure if Egrifta has peaked in the U.S market, if prescription trends do not pick up, consensus estimates would likely be revised.”