THTX stock is undervalued, Research Capital says

Following the company’s third quarter results, Research Capital analyst Andrew Uddin has lowered his price target on Theratechnologies (Theratechnologies Stock Quote, Chart, News, Analysts, Financials Nasdaq: THTX).

On September 26, THTX reported its Q3, 2023 results. The company posted EBITDA of $2.2-million on revenue of $20.86-million, up slightly from the same period a year prior.

“Theratechnologies’ reported quarterly revenue of $21 million, demonstrating a solid recovery as compared to the prior quarter. While new prescription growth continues on a strong path, we also crossed major milestones in the advancement of our pipeline and the lifecycle management of our commercial products,” said Paul Lévesque, President and Chief Executive Officer. “We are particularly pleased to report a strong cash balance and adjusted EBITDA of $2.2 million in the third quarter, which was promised at the beginning of the year and delivered ahead of schedule.”

“We continue to execute on value creation in our pipeline. A PDUFA date for the F8 formulation, the next generation of EGRIFTA SV®, is expected in the upcoming quarter and will position our commercial franchises for additional revenue growth potential. As such, we are laser focused on improvements to the bottom line through the remainder of 2023 and into the new year,” concluded Mr. Lévesque.

Uddin summarized the quarter.

“Theratechnologies released Q3 sales of $20.9M that were in-line with our expectations of $21.1M and THTX reported better than expected positive adj. EBITDA of $2.2M, we had expected ($2.9M),” the analyst explained. “THTX had previously pre-released that their adj. EBITDA would be positive on Sept 5th – achieving one of its key corporate goals. The company had cash and cash equivalents of $22.9M as of Q3 end (Aug 31st). Management tightened total 2023 revenue guidance to $82M-$85M (previously was $82M-87M) – we remain at US$83.6M. Of note, THTX continues to search for a NASH partner. Interesting timing this morning -Alfasigma S.p.A, an Italian pharma announced it is acquiring Intercept Pharmaceuticals, Inc. (ICPT- NASDAQ), which previously had a late stage NASH asset, for $19.00 per share in cash – which is the market cap equivalent of US$792M. In July 2023, THTX announced a 1-for-4 reverse stock share split, adjusting the outstanding common shares from 96.8M (pre-consolidation) to 24.2M (post-consolidation).We are maintaining our BUY rating but lowering our target price from US$14 (US$3.50 pre-consolidation) to US$7 – based on a SOTP methodology that factors in the company’s commercial segment and its NASH Phase III ready asset. Our revised valuation, takes into consideration the historically lower Cdn specialty pharma valuations as the sector has fallen since THTX reported Q2. The market is currently is only paying for THTX’s commercial segment (THTX is trading at a discounted 2023 EV/S multiple of 0.8x compared to the Cdn specialty pharma group which is at 1.5x) – investors are not placing any value on the company’s pipeline including its Phase 2/3 ready NASH asset. THTX could surprise with a new product addition to its current commercial portfolio in the upcoming quarters which we would expect to be accretive. We recommend that investors take advantage of the current share price to build a position given the opportunity of the undervalued commercial business and pipeline.

Uddin’s new target of $7.00 implied a return of 235.2 per cent at the time of publication.