Theratechnologies Inc T.TH

Thoughts following a conference call with TH Management

[SPCEO1]

I participated in a conference call with the senior management team this afternoon along with several other large THTX shareholders.  All together we estimate we own around 14% of the stock outstanding. None of these large shareholders is Soleus, the institutional investor where they are experts in cancer, who is THTX’s single largest shareholder with about 8% of the stock.
 
I came away from the meeting encouraged on the medical front but still doubtful regarding the investor engagement issue. Basically, they suggested we should trust them on the shareholder engagement front but they have failed miserably again and again on this front and this week was no different. Maybe they will come up with a good plan soon (my impression is they are confident about getting analyst coverage, but that was only an impression) but until they manage to get people to listen to their story, we might  not see much change in how the share price performs. Obviously, good data on cancer cannot be ignored forever, however.
 
We covered a lot of ground very quickly, so here is a rapid rundown of many of the key points:
 
1.)    I asked the Chief Medical Officer (CMO) what was the most important data in the phase 1a data release last week and he said he thought there were two key points.  First, TH-1902 worked well in a patient who had failed direct treatment with docetaxel as well as another similar drug before having a 53% decrease in the targeted tumors when using TH-1902. Clearly if TH-1902 works when straight docetaxel did not, that pretty much proves TH-1902’s targeted mechanism of action worked and got its docetaxel payload into the cancer cells when that did not happen when the patient took docetaxel alone. This info also highlights the amount of “free docetaxel” floating around a patient’s bloodstream after TH-1902 treatment is not a relevant factor. THTX is keen to prove that since there is concern the FDA might try to say the “free docetaxel” was more responsible for the improvement versus TH-1902. This situation pretty much blows that potential objection out of the water and is very helpful to  THTX’s cause. Second, he thought the one patient who got 11 cycles of treatment over 33 weeks was extremely important too since if THTX can keep cancer from progressing over a long period of time with a safe drug, that is a very big deal. I asked the CMO how many treatments a cancer patient typically gets of docetaxel alone before they have to stop taking the medicine due to side-effects and he answered 4-6 cycles. So TH-1902 was able to get almost 3 times that many cycles into the one patient without any meaningful side-effects. Indeed the patient stopped taking TH-1902 not because of some problem the drug was causing but because they wanted to get back to “normal life” outside of a rigorous drug testing program. Who knows how long they could have continued to take the drug?   
2.)    They changed their tune a bit on the path forward from here. Previously, they were adamant that if they saw a preliminary sign of efficacy, they would be required to announce that. And after they saw two in one cancer type they would approach the FDA about starting a phase II trial. They were wobbling on that in this call so I am really not sure what comes next at this point. What they indicated was that once they saw signs of efficacy (I believe most likely in more than 1 patient) they would first get the FDA to agree to a phase 1b protocol amendment in order move the number of patients in the 1b for that particular cancer to 25 (from 10). Recruiting another 15 patients will also take some time. This was said to be helpful in building a bigger data set which would help them achieve approval following a phase 2 trial, eliminating the need for a phase 3 altogether. A phase II trial would likely require 150 -200 patients and it would probably take 25-30% of the patients in that arm of the phase 1b trial to have success, measured either by tumor shrinkage or stable disease over long period of time, to convince the  FDA to let them move into a phase 2 trial. I am pretty sure I missed some key details in this part of our discussion, maybe because they were trying not to be too clear. We tried to nail down what this all might mean for timing but to no avail. All that being said, my sense was they expect to go for such a protocol amendment in the not too distant future (assuming the tests justify that).
3.)    Enrollment was said to be going quickly on multiple occasions. That is good because it speeds up the time until we could potentially get that protocol amendment. The more targets you have early, the faster you can see results. Both on this conference call and the last one, the CEO harped on about how important it was to get enrollment moving. There are still six sites, but they are emphasizing adding more US sites and I am not sure they are even going to bother with European sites now. One of the reasons enrollment is going quickly appears to be that doctors are aware now the drug has shown effectiveness and is safe, meaning the competition TH-1902 has with other drugs being tested at the testing site is no longer as stiff since it is a now a known quantity among the doctors at those testing sites. They said they were no longer last in line to get new patients because the doctors now recognize the drug is good.
4.)    It sounded like the patient with the 53% tumor shrinkage did see that result within 12 weeks, but I am not certain of that. If so, technically this would be THTX’s first preliminary indication of efficacy as well as proof of concept for TH-1902, two things we would like to see them announce. They just said it needs to be confirmed first before they can announce that but admitted that effectively we have seen those two things. One of the tumors THTX was targeting with this patient was totally eliminated, obviously helping the overall percentage reduction of 53% which is a measure of more than one tumor they were targeting in their analysis.
5.)    They are definitely still focused on following the IMMU model. Therefore, they are solely focused on identifying a single cancer type where TH-1902 works and pushing that once type hard to get it approved. In the background, they are doing a lot of pre-clinical research on other chemo bombs they can connect to their drug. They never intend to go forward into human trials with these but if they can get the first cancer type approved and then show potential big pharma bidders their pre-clinical work with other chemo bombs, the price to take THTX over starts rising a lot since the big pharma acquirer will be able to see the chances of success as they exploit this Sort1+ platform into many other drugs is high. Obviously, if they get big pharma to pay anything like the $21 billion GILD paid IMMU, we are going to walk away from this saying it was well worth the agonizing wait  we have endured so far.
6.)    On China, the new data has apparently really got those conversations ramped up again. They are aiming to get a sizable cash upfront payment – let’s hope they pull that off.
7.)    I asked about how many legitimate targets were there in the first 18 patients. While they never answered directly, the CMO said the patient pool was limited by many factors and he was happy with the three responders given how many real opportunities they had for success in that original pool of 18 patients.        
8.)    They claimed one reason for their recent silence was the heavy due diligence required of them to complete the loan deal with Marathon over the last two months. Maybe, but that is a bad excuse in my book. Since that deal was so important to them, I suspect they did not want to announce anything publically until they the loan was signed, sealed and delivered since any public pronouncement might have led to something that would create a reaction from some quarter which may have scuttled the loan. Once the loan deal was completed, that risk was removed and they could then announce the cancer data.
9.)    THTX would be happy to do research partnership deal to explore other alternatives with their PDC’s but they do not want to sign a partnership with big pharma which would result in the big  pharma company effectively taking over everything as that would jeopardize the IMMU model they are following.
10.) As of this morning, they are not in a blackout period for a short period of time for insider buys. My guess is we may see some purchases in the next few days.
11.) The management team had to wrap up the meeting in a timely fashion as I suspect they were off to the airport. Maybe to fly to China as they were not going to be available for the rest of the week?
 
My sense now is that we are not waiting for a press release telling us they have reached a  preliminary signal of efficacy but instead are waiting on one that says they had several indications of efficacy in one type of cancer and are filing with the FDA to amend the 1b protocol to take the number of patients up to 25 in that cancer type as a preliminary move before moving into a phase 2 trial. But it was all pretty mushy to me as to what exactly will happen and what a reasonable time frame might be to expect it to happen over. In the end, if they have good data, the news will come out pretty quickly and the stock should start rising with every additional good data point. The stock should start rising now, actually and then rise further with each additional data point. To be able to buy THTX  on a  market cap of $200 million (less than three times sales) and with this kind of cancer data giving us lots of reasons to expect more positive data in the future – well that is just nuts. But we cannot be the only ones who knows what is going on – they have to get the word out and I am not at all convinced yet they will do that in a timely fashion.

[hemiman]

This post has been removed in accordance with Community Policy

[palinc2000]

Paragraph number 3 is where I get mist excited...even though I doubt that they said that doctors know that the drug is good..If enrollment is quick it shows that doctors are now willing to send their hard to treat patients to participate in the trial because early data appear to be promising ... Word of mouth travels very fast ..... The more patients the faster to prove or disprove the efficacy

[qwerty22]

Some thoughts in red  

[SPCEO1]

Any wording you see that looks sketchy is almost certainly reflecting my writing style rather than a precise recording of what THTX said. That should be your go to assumption.

[SABBOBCAT]

SPCEO, don't worry, you can trust them when it comes to IR! Trust that they won't do anything until after they get their annual option grants. Remember, they moved it to before the annual results were published... No need to get Mr Market up to speed on the TH story before then, it migh cause share price appreciation LOL.  In all seriousness though, I applaud the team for the

[jfm1330]

Thanks for this information, it's the main reason I still follow this board. That being said, and it will not surprise you, I disagree at this point with your frustration. You tell us they follow a plan to replicate the IMMU huge success story. In my view, if it's the case they walk a fine line. I mean by that, that you want to go public the next time with a news spectacular enough that it

[palinc2000]

This is the problem with JMF  He says below that we have proof of concept and when challenged he backtracks the next day and again today  

[SPCEO1]

I am not too concerned about a hostile takeover attempt. If need be, someone could coordinate a likely successful resistance effort via about 35% of the shares outstanding which could be reached with less than 10 phone calls.