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Theratechnologies has an 84 per cent upside, says Research Capital

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.

André Uddin from Research Capital Corporation is still tight with Theratechnologies (Theratechnologies Stock Quote, Chart, News, Analysts, Financials TSX:TH), maintaining his “Buy” rating and target price of C$8.25/share for a potential return of 84 per cent in an update to clients on Wednesday.

Montreal-based Theratechnologies is a hybrid specialty pharmaceutical and biotechnology company focused on the HIV field. The company has two products launched in the US: Trogarzo for multi-drug resistant HIV and Egrifta, the only approved drug for HIV-related lipodystrophy.

Uddin’s latest update comes after the company released its third quarter financial results, which Uddin noted to be slightly below expectations with weaker then expected margins.

Theratechnologies’ quarterly report was headlined by revenue of $17.9 million (all report figures in US dollars except where noted otherwise), which came in below the Research Capital projection of $18.5 million, though it did represent a year-over-year increase of 27.9 per cent compared to the $14 million the company made in the same quarter of 2020.

The company’s EBITDA came in at a loss of $4.6 million compared to the Research Capital projection of a $3.3 million loss in comparison to the $3.1 million loss year-over-year.

Meanwhile, the company’s overall net loss was $9.5 million compared to the Research Capital projection of a $6.5 million loss, with Uddin attributing the higher loss to higher than expected expenses in research and development.

However, despite the losses, Uddin notes that the company has $51.6 million in cash and $53.8 million in convertible debt available, which company management notes gives them a cash runway for at least the next year.

Sales of the company’s Trogarzo product came in at $6.6 million for the quarter, slightly below the $7.2 million reported in the same quarter of 2020 and off of the Research Capital projection of $8.2 million, with Uddin attributing the shortfall to lower patient access to hospitals and clinics because of COVID-19, as well as the impact of a new competitor, Rukobia by ViiV.

Meanwhile, the company’s Egrifta product came in ahead of expectations with $11.2 million in sales in the quarter, beating the Research Capital projection of $10.3 million and taking a significant step forward against the $6.9 million reported in the same quarter of 2020.

With costs and benefits in mind, Uddin also notes that the company will look for a partner to run the Phase 3 trial of Egrifta, which would be a two-part, double-blind, randomized, placebo-controlled study in nonalcoholic steatohepatitis (NASH) patients with liver fibrosis, though he notes that it may take time for a partnership to form.

“We are confident in TH’s ability to strike a partnership for its NASH program given Egrifta’s promising profile on targeting NASH,” Uddin said. “TH has received interest from China for TH1902 and the SORT1+ platform – which we view as positive.”

Overall, despite the losses, the company is confident in its progress from a research standpoint, with significant steps on the horizon.

“We are excited for the progress that has been achieved to date across our R&D and commercial portfolios,” said Paul Lévesque, President and Chief Executive Officer at Theratechnologies in the company’s October 13 press release. “Our Phase 1 program for TH1902 in oncology is progressing well. To date, we have dosed several patients with tumors for which no known effective therapies exist, with some participants receiving more docetaxel, when conjugated to TH1902, than the indicated dose of docetaxel alone. While our MTD has yet to be identified, this outcome is in line with trial expectations and seems to indicate that TH1902 is better tolerated than docetaxel alone.”

Uddin projects relatively modest growth for the company through the middle of the decade, with the projected $70.8 million in revenue for 2021 representing a potential year-over-year increase of 7.1 per cent, though he does forecast a more pronounced jump to $92.1 million in revenue for 2022 (30.1 per cent potential year-over-year increase) before breaking into nine figures in 2023, and eventually growing to a projected $127 million by 2025.

With continued research and development still in play, Uddin continues to project negative EBITDA over the same time period, forecasting losses of $14.9 million in 2021, $18.1 million in 2022 and $25.7 million in 2023 before settling down to a projected $9.3 million loss in 2024, though he projects an $18.1 million loss in 2025.

Meanwhile, the analyst has forecasted a drop in his P/Sales multiple from the reported 5x in 2020 to a projected 4.7x in 2021, with a forecast of a continued descent through 2025, which carries a projection of 2.6x.

Overall, Theratechnologies’ stock price has risen by 34.7 per cent over the course of the year, having just reached its high point of $5.09/share on September 24.

About The Author /

Geordie Carragher is a staff writer for Cantech Letter
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