Theratechnologies is a triple from here, says Leede Jones Gable

The stock has fallen on hard times over the past couple of years, but investors should be seeing better results up ahead from Theratechnologies (Theratechnologies Stock Quote, Charts, News, Analysts, Financials TSX:TH). That’s according to Douglas W. Loe, analyst for Leede Jones Gable, who reviewed the latest news from the company in an update to clients on Monday and reiterated a “Speculative Buy” rating on the stock.

Québec-based Theratechnologies is an endocrinology and oncology drug developer with FDA-approved HIV drugs Egrifta and Trogarzo along with clinical programs. The company announced on June 2 that it received US FDA approval to resume its Phase 1 clinical trial for candidate TH1902 for ovarian cancer, following the company’s voluntary stoppage in patient recruitment as of this past December. TH also said the FDA has agreed to its amended protocol for Sudocetaxel Zendusortide (TH1902), with the new protocol to examine lower doing regimens for TH1902 as a way to mitigate adverse side effects that were observed in some patients at the original test dosages.

“We are very pleased that the FDA has agreed to our plans to optimize the dosing regimen for sudocetaxel zendusortide, and to other proposed changes to the protocol so that we can now restart this important Phase 1 clinical trial,” said Christian Marsolais, Ph.D., Senior Vice President and Chief Medical Officer at Theratechnologies, in a press release. 

“We have been working closely with our scientific advisory committee and the FDA to align on this updated protocol, which we believe will expedite development of this novel peptide-drug conjugate and ultimately deliver effective targeted therapy to people with advanced cancers, while minimizing toxicit,” Marsolais said.

Loe commented that at this point he is still basing his (maintained) price target of $3.75 on Theratechnologies on the company’s FDA-approved HIV therapeutics portfolio, but he admitted to the “attractive” pharmacologic properties of TH1902 that are justifying ongoing clinical testing. 

“While we remain optimistic about TH1902’s oncology prospects based on already-published preclinical pharmacology and thus endorse the firm’s decision to advance the asset into a revised Phase I program, we believe that R&D capital deployed to fund TH1902 has substantially obscured the underlying value in Thera’s HIV-focused specialty pharmaceutical operations,” Loe wrote.

“On an adjusted basis (by which we mean excluding R&D expense, largely attributable to TH1902 development), EBITDA margins of >20 per cent were generated just on Egrifta/Trogarzo commercial operations alone. Thera’s cumulative R&D expenses that we assume were predominantly deployed to TH1902 preclinical/Phase I testing were non-trivial, US$65.2 million in F2021/22 alone,” he said.

At press time, Loe’s reiterated $3.75 target represented a projected one-year return of 200 per cent.