RE:Sizing things up after the recent dealsWRT to 2) & 3) could an alternative solution not be just a little bit more parience. Early sales of new drugs are difficult to predict. This board seems to have a strong idea where sales are headed but there's still uncertainty and reasons for some (like thera management or analysts) to exercise some caution. 3/6/9 months we and the market are going to have a clearer picture of the likely sales development pathway, if they look strong do you still expect the analyst coverage to be holding the SP back. At that stage won't the numbers be speaking louder anyway? It seems like a cheaper option to just wait a little longer and deal with the frustration short term. I guess my question would be as the story simplifies and Trogarzo's pathway looks clearer will the stock still remain undervalued because it doesnt have the coverage it deserves? Alternatively would the Nasdaq listing/financing/ US analysts not just a way of trying to rush to get to a position that we'll get to anyway, eventually, if the sales figures are good?
We could also revisit the the discussion we've had a number of times about who is ultimately responsible for selling the story of Theratech to the market, analysts or theratech management? Management seem to want to keep a lid on things atm, are the analysts taking their lead from that? It would be great to get this thing hyped and get to a position where its overvalued. I could sell some stock then without having to see the sales numbers, but I'm still prepared to wait impatiently if necessary.
On 7) and Taimed's pipeline. Given the pipeline was known at the time the contracts were signed it always seemed strange that things weren't spelt out a little clearer how these follow on drugs, which at least in part are derived from Trogarzo would be handled. It seems hard to see how any of their antibody based product arent going to interfere with Trogarzo sales IMO. I know there's some stuff in the contract about this but it seems quite vague, a lawyers playground.
SPCEO1 wrote: So, Egrifta now belongs 100% to TH and TH is now a reasonably cash rich company ready to make acquisitions. Here are some of my thoughts about the current state of TH - feedback is encouraged:
1.) In terms of catalysts we can put a date on, the 2Q financial results and conference call is the next one. Probaly going to be on 7/5 or 7/6. The only thing that matters on this call is whatever is said about Trogarzo's progress. Egrifta is going to come in with something in the vicinity of 8-9% growth from the first quarter, which is pretty good and 11% over last year based on the always untrustworthy Bloomberg prescription data. I am going to guess sales of Trogarzo will amount to about C$2 million for the month fo May. All that is water over the dam, however. The only thing that is critical is the update on the number of Trogarzo patients, if offered, and any insight into how the second half of the year looks for Trogarzo sales. Credit Suisse reports that Taimed told them there were nearly 200 patients in early June (versus TH's saying nearly 100 on May 16) and that Taimed had nice orders placed with Wuxi for the second half of the year. So, perhaps we will get some new numbers that will give a good idea of how fast the sales curve is turning higher. There will also be some sorting out of the income statement to be done - analysts will need to include interest payments (in 2019 -2021, but not 2018) and amortization expenses for the convert and Serono deal respectively and reduce the previous expenses they had in their models for royalty payments to Serono. It should be negative for EPS in 2018 but positive for cash flow as the amortization charges are not cash expenses.
2.) TH is in desperate need of - in fact it deserves - better analyst coverage and that appears to only be available in the US. Hopefully we will see an RBC report soon given they were the underwriters of the convertible deal. But it would be good to have even more US analysts covering the stock. This, however, may well be tied to a NASDAQ listing as the US analysts are not as likely to be motivated to market a stock that is not on the NASDAQ.
3.) Could TH do another deal in conjunction with a US listing in order to get the analyst coverage the company deserves? It would likely need to be for at least $75 million to get any US broker's attention and they really don't need that money unless they have bigger goals on the acquisition front than they have expressed thus far. I hope not as they could easily dilute the expected great growth story of Trogarzo by acquiring a drug already on the market. In any event, they need to get US analyst coverage and listed on NASDAQ and management needs to figure a way to do this without doing harm to current shareholders, which may not be easy to accomplish.
4.) It would be very nice if the company could nail down a deal to acquire US and European marketing rights to one or more of Taimed's other drugs. That would be a nice use of some of the cash as it would address the criticism that TH has no pipeline and therefore does not deserve as high a P/E multiple as other drug companies. Unfortunately, Taimed might not have a lot of incentive to sell those rights so soon. Additionally, the whole conversation about marketing rights to Taimed's other drugs could easily lead into a discussion of why these two companies are separate. It makes total economic sense for Taimed to acquire TH based onthe two companies share prices. Merging and listing the combined entity on NASDAQ makes sense. We can only hope they have no interest in doing so and really don't want to dirty their hands in the marketing of their drugs as TH shareholders are likely much better off with things set up as they are now. The costs of research and manufacturing that would come with a Taimed merger would likely reduce the upside for TH shareholders assuming the acquistion terms offered us the combined company's stock. We defintely would not want cash. One of the things arguing to delay such an merger is that TH should use up its Canadian tax losses first before merging, although I am sure something could be set up from an accounting perspective so those were not lost in a merger.
5.) TH has been talking about small acquisitions for a long time now but nothing has materialized yet. Perhaps with the additional cash, they will now pull the trigger on one or two. If they use cash, the chances of the acquistions being immediately accretive to earnings (and certainly cash flow since the amortization of the deal cost would be non-cash charges) would be pretty high.
6.) I don't know if we are going to hear anything publically on the IM version of Trogarzo or not (at least more than we have already heard). I doubt the stock would react to that in any meaningful way in any case. I suppose having that version available will extend the market some but JFM1330 has indicated that such a shot is no fun get and that IV may be preferable to many anyway.
7.) TMB 365 is apparently very close to Trogarzo chemically. I have seen someone say it is 98% the same. Could its development be hurried through the FDA as a result and the 5 years we currently think it will take to make it through the FDA testing process be speeded up? If so, that is a big deal and it would be imperative for TH to get the marketing rights to it. If they do, TH's stock should take another leap higher given the target market for TMB 365 is much larger than Trogarzo (although the expected price of this version fo the drug would be much lower as well). Would TMB 365 compete with Trogarzo in MDR or would the Trogarzo market continue as it is (if Trogarzo is working, doctors tend not to want to switch to something else but that might not be the case in this situation).
8.) Hopefully, now that we have paid Serono for projected future sales of Egrifta, the sales team can sell the drug better than expected and make the whole deal more attractive to TH. If saels come in better than what were implied in the payment to Serono, this deal would become a big winner for TH. Of course, the opposite is also true. If the sales of Egrfta come up short of what the deal assumed, then the cost of the deal will turn out to be higher than might have been justified.
While our focus is rightly on Trogarzo sales for now, there is a whole lot of other things that might occur in the next year (or next week) that could be very important as well for the development of the share price. There are not a lot of risks out there either. The main risk is that Trogarzo sales just don't materialize as expected or that Egrifta sales collapse. Those don't appera to be big risks at the moment. Another risk is that Trogarzo somehow gets wrapped up in the trade war brewing with China but that seems very unlikely. There just don't appear to be any huge risks that we can actually know about right now. And there still seems to be quite a lot of things that could propel the share price higher.