Theratechnologies is a Buy, says Research Capital

André Uddin from Research Capital Corporation is slightly more tentative on Canadian biotech name Theratechnologies (Theratechnologies Stock Quote, Chart, News, Analysts, Financials TSX:TH), maintaining his “Buy” rating but reducing his target price from $8.25/share (US$6.45/share) to $7.95/share (US$6.20/share) for a potential return of 84 per cent in an update to clients on Thursday.

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 financial results for the fourth quarter 2021.

“Total revenues were slightly below our estimate while adj. EBITDA was largely in-line,” said Uddin, whose target valuation for Theratechnologies is based on a sum of the parts methodology that factors in the company’s commercial segment and NASH Phase 3 asset.

The company’s financial results were headlined by $18.8 million in revenue (all company financials and projections are in US dollars), representing a slight year-over-year decrease from the $19.1 million the company reported in the same quarter of 2020, as well as being slightly off from Uddin’s $19.7 million estimate.

A miss on Trogarzo sales was a big reason for the revenue miss, as Theratechnologies only reported $6 million in sales compared to the Research Capital projection of $7.7 million, and being nearly 30 per cent down from the $8.4 million in sales reported in the same quarter of 2020.

“The weaker sales were mainly due to a clawback provision in France related to previous reimbursement terms,” Uddin said. “The sales were also affected by lower unit sales as a result of lower patient access (due to COVID-19) and the competition from ViiV’s Rukobia (launched in the U.S. in H2 2020).”

However, despite the shortfall, Uddin also noted that Trogarzo sales in the United States have started growing once again in the current quarter as COVID-19 eases, with an October 3 date set for a PDUFA to clear a Trogarzo IV push, making for easier usage.

Meanwhile, there was more positive news on the Egrifta side, with the company reporting $12.8 million in sales to beat the Research Capital estimate of $12.0 million while outpacing the $10.8 million figure from the same quarter of 2020 due to a higher selling price and lower government rebates and chargebacks.

“Post-COVID, execution of our commercial strategy remains a high priority, as we move swiftly to catch up with demand for Trogarzo and EGRIFTA SV in patients with unmet needs,” said Paul Levesque, President and Chief Executive Officer of Theratechnologies in the company’s February 24 press release. “The momentum that we carry into fiscal 2022 will be reinforced by the buildout of our own US-based field force supported by a focused therapeutic messaging strategy. The strengthened marketing and sales effort built up throughout the pandemic has clearly resonated with both patients and providers. These driving forces allow the Company to be even more competitive in 2022, as we flex our superior ability to connect and engage with patients and providers in order to improve therapeutic outcomes.”

After ending the year with $69.8 million in revenue, Uddin projects modest growth for Theratechnologies over the next few years, forecasting a year-over-year increase of 17 per cent to $81.7 million before jumping into a projected nine figure range at $104.6 million in 2023 (year-over-year increase of 28 per cent). The move is followed by an estimated jump to $116.8 million in 2024 (year-over-year increase of 11.7 per cent), with the projection period ending at $127 million in 2025, a year-over-year increase of 8.7 per cent. 

With continued research and development still in play, Uddin continues to project negative EBITDA over the same time period. Following the reported loss of $14.6 million in 2021, Uddin forecasts further losses of $23.5 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, Uddin forecasts the company’s P/Sales multiple to drop from the reported 4.1x in 2021 to a projected 3.5x in 2022, with a forecast of a continued descent through 2025, which carries a projection of 2.2x.

Theratechnologies has seen its stock price drop by 19.2 per cent over the last 12 months, with a 5.1 per cent drop since the start of 2022. The stock jumped to a 52-week high of $5.09/share on September 24, though it later dropped to a 52-week low of $3.50/share on January 18.