Theratechnologies has a 247 per cent upside, says Leede Jones Gable

It’s been steady as it goes for Montreal-based endocrinology and oncology drug developer Theratechnologies (Theratechnologies Stock Quote, Charts, News, Analysts, Financials TSX:TH), but investors can expect a nice uptick in business over the remainder of 2023. That’s the take from Leede Jones Gable analyst Douglas W. Loe, who in a Wednesday review of the latest quarterly results reiterated a “Speculative Buy” rating on the stock and C$3.75 target price, good for a one-year projected return at the time of publication of 247 per cent.

Biopharma name Theratechnologies released on Wednesday its first quarter fiscal 2023 financials for the period ended February 28, with Q1 revenue up seven per cent year-over-year to $19.9 million and an adjusted EBITDA loss of $3.9 million compared to a loss of $4.1 million a year prior. The company said earnings were negatively affected by production costs related to a pair of drugs, while cost of sales was $4.7 million for the quarter compared to $6.1 million a year earlier.

“Our first quarter revenue growth was impacted by variability in inventories at the specialty pharmacy level and set against an unusually strong Q1 2022. However, new patient enrolments, a leading indicator for our revenues, were significantly ahead in the first quarter of 2023, as compared to the first quarter of 2022, and are indicative of a stronger performance for the remainder of our fiscal year,” said Theratechnologies’ President and CEO Paul Lévesque in a press release.

The two assets that made up TH’s revenue are FDA-approved HIV lipodystrophy drug Egrifta and multidrug-resistant HIV-1 mAb drug Trogarzo, approved in the US and the EU. For the Q1, Egrifta sales were up 8.6 per cent year-over-year to $12.7 million and Trogarzo sales were up five per cent to $7.2 million. (All figures in US dollars except where noted otherwise.)

Looking at the results, Loe summed up the quarter as “benign” to his investment thesis on TH, as the numbers arrived in-line with expectations. At the same time, Loe is optimistic on growth for the rest of the fiscal year, saying that both Egrifta and Trogarzo clearly have positive medical benefits in their respective markets, based on Phase 3 data supporting their FDA approvals.

As well, on Egrifta, Loe argued that the drug could gain heightened status as an active endocrinologic agent at a time when this activity is gaining more favourable regard in larger non-HIV markets, and he added that the higher concentration F8 Egrifta formulation (with a filing expected during the second half of fiscal 2023) could on its own lift Egrifta sales in fiscal 2024 and beyond.

The signs look good for growth in Trogarzo, too, according to Loe, who referred to positive data from comparison drug Rukobia from GlaxoSmithKline. 

Loe called management’s guidance for full fiscal 2023 revenue of $90-$95 million aggressive when compared to its recent growth trajectory, yet he sees it as doable, with his own fiscal 2023 revenue estimate currently marked at $91.4 million.

“On the milestone watch, quarterly Egrifta/Trogarzo sales growth will be key to our investment thesis, and we will be interested to see how TH1902 Phase I activity proceeds in FH223 and how final data will influence future Phase II activities and partnership interest,” Loe wrote.