RE: Target rise from VersantMore info from the Versant Equity Research...Enjoy!
SUMMARY & RECOMMENDATION
Clearly, Merck-Serono’s US launch (that we expect in Q1/11) will be a key
share price driver for Theratechnologies and a key indicator on how receptive
the global HIV medical market will be to Egrifta’s medical benefits. We are
encouraged that Merck-Serono believes it can maximize revenue potential at
US$23,900 per annual course of therapy, suggesting to us that the company has
at least some evidence that insurers may be willing to reimburse a sizable
proportion of Egrifta prescription costs at this price, but reimbursement from
U.S. insurers is still a risk factor to our positive outlook. We now incorporate
revised Egrifta pricing assumptions into our model, partially offset by lower
market penetration at this price.
Including the US$25 million cash payment to which Theratechnologies was
entitled from Merck-Serono on receiving US FDA approval, the company has
about C$69 million in cash, less Q4/10 burn, clearly sufficient to fund pipeline
development activities now that partners are assuming most Egrifta marketing
and promotion costs.
For Latin American sales, our model assumes annual price of US$6,000, and we
assume Theratechnologies’ transfer price to Sanofi-Aventis is about 65% of this
and that manufacturing costs will be 15% of transfer price; we assume launch in
at least one major market by H2/12. Our model assumes no supplemental
milestone or royalty payments associated with the Sanofi-Aventis deal.
Taken together, we believe there is modest upside to Egrifta revenue potential
during our forecast period, for which we are increasing our one-year target price
from $11.00 to $12.50. Our valuation is still based on NPV determination (25%
discount) and multiples of F2012 forecasts (15x EPS of $1.09; 10x EV-to-
EBITDA, EBITDA of $67 million).