Theratechnologies has target slashed by Leede Jones Gable

Softer than expected quarterly revenue and more muted guidance from management are reasons to pare back ambitions on Theratechnologies (Theratechnologies Stock Quote, Charts, News, Analysts, Financials TSX:TH). That’s the gist of things from Leede Jones Gable analyst Douglas W. Loe, who reported on the Quebec-based drug developer on Wednesday and reiterated a “Speculative Buy” rating on the stock while lowering his target from C$3.75 to C$2.00 per share.

Theratechnologies, which focuses on endocrinology and oncology and has FDA-approved HIV lipodystrophy drug Egrifta along with multi-drug-resistant HIV-1 mAb drug Trogarzo, announced its second quarter 2023 financials for the period ended May 31, 2023, on Wednesday. The company posted $10.9 million in Egrifta net sales and $6.7 million in Trogarzo net sales for total revenue of $17.5 million, representing a year-over-year drop of 8.9 per cent. (All figures in US dollars except where noted otherwise.)

The company said that given the lower than anticipated Q2 revenues, it’s revising its full-year topline guidance to $82-$87 million, good for a year-over-year increase of 3-9 per cent, which compared to prior guidance of $90-$95 million.

“Second quarter revenues were negatively impacted by the build-up of larger than necessary inventories by specialty pharmacies at the end of 2022, which was in anticipation of expected higher demand. Additionally, in an effort to improve gross-to-net, we renegotiated contract terms with one specialty pharmacy, which resulted in a lowering of their overall inventory levels,” said Paul Lévesque, President and CEO, in a statement.

Looking at the results, Loe said the Egrifta and Trogarzo sales were actually solid in comparison to historical standards, although less solid in comparison to more recent quarterly trends. On the company’s revised guidance, Loe called it a “fairly dramatic revision.”

“Assuming that about $3-$4 million of this cumulative delta is already impacted by FQ223 revenue shortfall, that still implies a cumulative guided revenue shortfall in FH223 of up to $11-$12 million, even more striking when considering that we are already substantially into FQ323 as of this writing,” Loe wrote.

Loe said he stands by his positive views on the medical merits of Egrifta and Trogarzo in their respective HIV markets, and he expects Theratechnologies’ Phase 1 activities with its candidate TH1902 should resume shortly with a new focus on funding the program while still allowing for a move to positive EBITDA in the next few quarters.

“The firm certainly has sufficient cash-on-hand to substantially advance TH1902 Phase I ovarian cancer testing to data, probably near the end-of-F2024 if enrollment resumes later this quarter,” Loe said.

At press time, Loe’s new C$2.00 target represented a projected one-year return on TH of 58.6 per cent.