It’s time to buy Theratechnologies, Mackie Research says

Specialty pharma company Theratechnologies (Theratechnologies Stock Quote, Chart News TSX:TH) has been on an 18-month slide but the stock is looking better, says analyst André Uddin of Mackie Research Capital Corporation, who in a client update on Wednesday upgraded his rating from “Hold” to “Buy.”

Montreal-based Theratechnologies specializes in the HIV field, with two launched products in the United States: Trogarzo for multi-drug resistant HIV and Egrifta for HIV-related lipodystrophy. In February of this year, TH acquired cancer platform company Katana Biopharma.

Theratechnologies hit a high of $14.75 per share in late May of 2018 but has since dropped steadily, hitting a two-and-a-half year low of $3.70 just last week, with Uddin in the past pointing to weaker-than-expected quarterly numbers as an issue.

But there’s now upside to the stock, says Uddin.

“We are upgrading TH from a HOLD to a BUY rating as we believe TH’s current share price represents a favourable risk reward situation based on the company’s growth outlook,” Uddin said.

“We downgraded TH on January 9, 2019, mainly due to slower-than-expected sales growth of Trogarzo – since then the stock has traded down 127 per cent. TH is well funded for its planned NASH Phase III trial and revenues should continue to drive growth,” he says.

Trogarzo is TH’s main growth driver, according to Uddin. The drug represents one of only a few treatment options for patients with multi-drug resistance HIV-1, and Uddin thinks that while the ramp up in sales has been slower than expected, sales should continue climbing going forward. As well, the analyst points to a decision by the European Medical Association in September to approve Trogarzo, with a launch expected imminently.

Concerning Egrifta, Uddin says that the company just launched (on November 25) a new formulation of the drug (Egrifta SV) which the analyst says is “more user friendly,” which should help future growth. As well, TH has reported this year promising data on a Phase w trial with Egrifta for treating HIV patients with non-alcoholic steatohepatitis (NASH), with a Phase 3 trial expected during the second half of 2020.

Lastly, Theratechnologies has two candidates from the Katana oncology platform which will enter Phase 1 trials in 2020.

Together, the picture results in a “Buy” rating and 3.5x EV/Sales valuation, according to Uddin. That makes for a $6.50 per share target, which represents a projected 12-month return of 61 per cent as of publication date.

On the commercialization of Egrifta SV once-a-day small volume subcutaneous injection formulation of tesamorelin for the reduction of hard belly, Theratechnologies president and CEO Luc Tanguay said in a November 25 press release, that the company’s salesforce has started detailing the product to physicians.

“Given its many improvements over the original version of tesamorelin, EGRIFTA SVᵀ should help sustain growth for tesamorelin over the coming years. We are committed to continue managing the lifecycle of our products in order to help people living with HIV,” said Tanguay.