Theratechnologies is a Buy, says Research Capital

Canadian pharma stock Theratechnologies (Theratechnologies Stock Quote, Charts, News, Analysts, Financials NASDAQ:THTX) continues to languish in sub-$1.00 per share territory, with investor confidence seemingly at a lull after the company paused its clinical work on lead cancer drug candidate this past December. 

But analyst Andre Uddin of Research Capital Corp thinks you’ll want to own a piece of this name going forward, since its pipeline of drug prospects is worth it. Uddin delivered a report on THTX to clients on Wednesday where he reiterated a “Buy” rating while lowering his target price from $4.50 to $3.50.

Montreal-based Theratechnologies reported its second quarter fiscal 2023 results on Wednesday for the period ended May 31, 2023. Revenue was down nine per cent year-over-year to $17.5 million, while adjusted EBITDA was reported as a loss of $6.1 million compared to a loss of $11.7 million a year earlier. (All figures in US dollars.)

Management said inventory issues drove the year-over-year sales decline and that those issues will impact the full-year results, although it doesn’t see the drop impacting the company’s path to profitability. Guidance has now moved from 2023 revenue of $90-$95 million to $82-$87 million.

“As previously communicated, we intend to produce positive adjusted EBITDA in the latter part of 2023 and beyond,” said President and CEO Paul Lévesque in a press release. “Since the loss in sales during the first half of the year is not recoverable, we are recasting guidance to reflect year-over-year growth of the commercial portfolio to fall between 3 per cent and 9 per cent.”

Uddin said THTX’s top and bottom lines were misses of his estimates, where Uddin had called for $21.7 million in fiscal Q2 revenue compared to the resultant $17.5 million, while the net loss of $10.0 million was also below his estimate at negative $6.2 million.

Uddin said with a recent FDA approval to resume trials on TH1902 with changes in dosing, administration frequency and tumour selection criteria, the trial will likely resume in the coming weeks.

Theratechnologies is also continuing to search for a partner for its planned Phase 3 trial of tesamorelin for treating nonalcoholic steatohepatitis (NASH), Uddin noted, while it’s also actively pursuing potential product acquisition, in-licensing, co-promotion and other opportunities to grow its revenues. 

It’s that extra potential that investors should be focusing on when considering THTX, Uddin said.

“Based on our valuation, the market is only pricing in THTX’s commercial segment and has not placed any value on the company’s pipeline including its NASH asset. This may be due to a longer than expected timeline that the company has taken to find a potential partner(s) for its pipeline,” Uddin wrote.

As of publication date, Uddin’s new $3.50 target represented a projected return of 307 per cent.