Theratechnologies stock has a 43 per cent upside, says Mackie

Specialty pharma company Theratechnologies (Theratechnologies Stock Quote, Chart, News TSX:TH) missed on its latest quarter but the market has yet to factor in the enormous potential of the company’s drug pipeline, according to Mackie Research analyst André Uddin, who delivered an update to clients on Thursday.

Uddin reiterated his “Buy” rating but lowered his target price from C$4.50 to C$4.00, which at press time represented a projected 12-month return of 43 per cent.

Theratechnologies specializes in the HIV field and has two products launched in the United States, Trogarzo (tesamorelin) for multi-drug resistant HIV and Egrifta, the only approved drug for HIV-related lipodystrophy. The Montreal-based company is also advancing Egrifta through a Phase 3 trial for NASH, an inflammatory liver disease, and has two pre-clinical oncology assets, one of which is expected to enter Phase 1 trials in 2021.

Theratechnologies on Thursday announced financial results for its fiscal third quarter 2020 ended August 31, showing Egrifta net sales of $6.9 million compared to $9.2 million a year earlier and Trogarzo net sales of $7.2 million compared to $6.9 million a year earlier. (All figures in US dollars except where noted otherwise.)

Recent business highlights for the company include the announcement on September 10 that TH will move forward with its Phase 3 tesamorelin trial for NASH, while the company noted that COVID-19 “continues to represent a challenge” for the company’s sales, as reps aren’t able to meet face-to-face with healthcare providers.

In his quarterly commentary, President and CEO Paul Lévesque called the move to pursue tesamorelin for the treatment of NASH a key business decision, saying, “This well-thought out decision was based on strong scientific evidence and feedback from some of the world’s most renowned experts in this disease area.”

For his part, Uddin said the Q3 numbers were below his estimates, even considering Theratechnologies’ preliminary Q3 announcement on September 21. The analyst had called for $14.0 million in revenue compared to the resultant $14.0 million while TH’s adjusted EBITDA loss of $3.1 million was below Uddin’s projected loss of $2.7 million.

Uddin said the weaker sales were due to higher rebates and chargebacks by payors and tighter inventory management by wholesalers.

“In the U.S., the growth of Trogarzo’s TRx(s) has recently slowed down – this is not a surprise to us as COVID-19 is expected to impact the sales of drugs used in hospitals/clinics,” Uddin wrote. “Trogarzo was launched in Germany in September 2020 and the rest of the EU is being rolled out – Norway is the next. We are reducing our Trogarzo sales estimates across the board due to COVID-19.”

Uddin chalked up the lower Egrifta sales to a one-time return of Egrifta vials to the company as a result of the transition from Egrifta to Egrifta SV.

“We are maintaining our BUY rating and but reducing our TP from C$4.50 to C$4.00, as we are lowering our Trogarzo sales estimates,” Uddin said.

On the market in the US for a NASH drug, Uddin called it enormous and pegs NASH-based sales for Egrifta at $108 million in its projected first year, fiscal 2026, jumping to $541 million in 2027 and $1.082 billion by 2028.