Theratechnologies Inc T.TH

RE:RE:RE:RE:RE:RE:RE:RE:RE:Fitting

[scarlet1967]

I will add to what has been said my take re the possible scenarios which can play out between now and end of 2022. It is somehow hard to calculate but let me have a go at it, looking at their income statement for 2020 there are operating expenses with sub categories like variable direct costs (trackable) such as cost of goods, R&D expenses, indirect variable costs (not trackable to a specific operation) like loyalties and fixed costs like overheads for instance leased office, salaries... Their SGNA (selling costs like cost of goods, general operating costs related to the operations and administrative costs) will be part of variable expenses.

Then we have revenues, sales of both drugs and some minimal interests for the cash etc. Apart from indirect variable and fixed costs the rest of expenses are relative to their operations and varies from Q to Q.

They had about $57 M at the end of last Q , the total operating expenses for 2020 was about $84M and total revenues( Trogarzo’s revenues  will be shared with Taimed) was about $66M with annual loss short of $23 M which account for a cash burn rate at very roughly estimated an average above $5.5M per Q(excluding bonuses among others) in 2019 the annual lost was about $12.5 M and in 2018 about $6M so to summarize it the cash burn has been increasing due to mostly R&D variable expenses and will be going higher going forward. Now to try to answer the question how much they need to fund the trials in the next year or two, the oncology phase 1 which is the least costly and smallest phase have about 60 patients, I did a quick search on the net so that phase very generally speaking costs about $4 to $5M again generally speaking phase 2 costs about $11 and 3 about $22 M, by end of 2022 if the trial still progressing (which I believe the odds are favorable for that case based on general statistics) they will be at phase 2 stage. They had about $57 M by end of last Q assuming that not reliable number of about $10M burn rate per Q and stagnated sales they won’t have much or any remaining cash to fund the trials past end of 2022. But with increasing revenues which I believe will be the case they will have some residual cash at that stage.

They said the Phase 3 NASH will be enrolling 900 patients including 75 to 100 HIV patients for18 months and the cost of that phase 3 trial is a between $20 to $25 M followed by post approval phase 4 adding additional 1100 patients a total of 2000 patients for the duration of 60 months and the cost of $100 M for that phase. What I am trying to say the R$D expenses will be gradually increasing starting with Phase 3 NASH scheduled to start in September however they need to enroll hundreds of patient so that 18 moths will most likely be 3 or more years followed by more costly phase 2 oncology trial towards the end of 2022 and that is fact but with increasing revenues between now and end of 2022 and beyond will help their negative cash flow situation and their balance sheet  gets a bit of help too, by then the SP should have appreciated significantly so that potential raise will be at much higher prices, as mentioned they can also borrow the money on the back of good trial results( they can then justify the NVP of the trial easier so the lenders assessment of risk/ reward ratio for borrowed money makes sense to them)also if they decide to partner with other companies then the funding issue can potentially be dealt without a cash rise or additional debt. So the wild cards here to me is how much the revenues can grow and how attractive their programs will be to other potential partners and lenders. We know the revenues should be growing post pandemic both in North America and Europe, we also know they have a global patent coverage for their PDC and currently are applying to extend the patent coverage for NAFLD/NASH in Asia/Africa so if oncology trial is successful (whether they show efficacy in one condition or several) and NASH particularly if the program gets the approval of both US and Europe both programs are good candidate for potential partners in the US, Europe and other jurisdictions, also both programs further down the progress can be easily use as collaterals for loans as the company can produce a proforma financial statements for those indication.

 

palinc2000 wrote:

Exercise of the warrants will add US 26.5 million .The added dilution resulting from the exercise of the warrants will on the other hand make it more difficult for the Convert to be in exercise territory

 

Wino115 wrote:

 

The good news is the TH1902 phase 1 is relativey inexpensive as trials go, and they've said that.  Phase 2 will also not be that costly given the smallish likely number of patients done in P2 for cancers. But of course if they get to Phase 2, there should be no worries on cash flow and financing options.   If they don't, that money can all go to NASH.  

The ramp up for the full NASH trial will likely take some time as SpaTrap has noted in the past on other trials. So those costs will be spread out and could take 12 months for enrollment to be filled. They've said they can handle the start of both and I don't think they are using an unrealistically high growth rate on revenues to confidently say that.  That would be foolish given the environment we are coming from and still suffering from in some parts of the world.

I think they are being conservative in their budgeting and when they say they have enough to do the full TH1902 for 2021-2022 and beginning of NASH (however that is defined).  They "hope" sales grow and they've probably cut some costs in sales and overhead to put it into the R&D budget.  They are financially conservative and I would guess they won't push it too far close to the convert due date. But they will wait for pipeline progression over the next 12 months to see what options are available. This is a year where there really are a number of decision tree points that will be defined as far as future funding, cash flow, etc. 

my own expectation would be if TH1902 moves along, meaning we get a clearer view into what could be the possible revenue implications out 24 months, that will really provide a step function in the valuation.  We finally (after 3 hard years) see a financial foundation supporting an appropriate valuation versus peers and in tandem with multiples investors see in the market.  We finally get that tie-in between valuation and the net present value of forecasted financials. That is when they'll look to raise capital for the full NASH spend plus what would be needed for commercialization of the pipeline and a small buffer.  If they get there, the convert should be in "exercise" territory above the strike.  If not, raise an extra $50 million or take on some straight debt too.  It's okay to have a bit of debt on your balance sheet if you know you have much higher revenues coming in.  In fact, capital market textbooks would tell you the optimal balance sheet structure for shareholders is to have some leverage provided your interest cover is adequate; it is also tax efficient. They would easily be in that territory with oncology progressing into commercialization phase.  No need to always dilute shareholders in that case.  Especially as rates would be very low for them at that point as revenues become clear to lenders.

 

 

qwerty22 wrote:

 

So sorry I should work this out myself but let's say they raise cash in late 2022 how much cash can they earmark for NASH before then, putting aside some for cancer etc?
Presumably they want to enrol the 1000 patients ASAP.

 

Wino115 wrote:

 

I'm sure their budget balances, but you are right that expenses have to be up. I would brace for seeing them up quite a bit myself.  The burn rate has to be up unless they culled some sales staff and middle ranks and really tightened their belt elsewhere.  They aren't hiring cheap people.   The budget probably has some "hopes" built in too that sales grow a bit. I don't think you'd budget partnerships or early cancer sales as those are wildcards at this point.  The strategy should be to raise a bit of cash in late 2022 at much higher levels if cancer succeeds.  If they get accellerated approval and the interim read at Phase 3 just backs up the phase 2 data, then the door opens wide.  

But I would brace for a ramp of expenses and only a modest ramp in revenue, so a higher burn rate for 2021.  It will likely force the analysts to finally get real with their legacy biz numbers. I'm not sure analysts views on legacy assets mean that much for the actual future value we can realize, but it could lead to some residual retail puke at NBF or Mackie if the analysts approach it negatively and don't focus on the more important pipeline potentials. 

 

scarlet1967 wrote: I need to correct myself here as I deducted $3M from cash burn in fact a good portion of that not earned revenue is accounted for Trogarzo sales which is shared with Taimed also they have added few new recruits and a board member so they have more folks on their payroll.
It was also based on the assumption that they paid good amount of money to constants but if they do increase revenues it can offset those costs and more in next few quarters. They although on a proforma basis still have to pay CROs to start the NASH.  So those calculations are  based on many assumptions which could be close to reality or wrong.
We will know what the cash burn was for last Q in July presuming they start the NASH trial in September the burn rate will increase. That's why they should have a strict cost control/cutting measures in place. The board is too populated imo letting some less productive board members go is a good start in my opinion.
 

 

scarlet1967 wrote:

”As at August 31, 2020, cash, bonds and money market funds amounted to $26,847,000.”

”We ended the first quarter of fiscal 2021 with $56,716,000 in cash, bonds and money market funds.”

The offering grossed  about $46,000,000 after fees the net proceeds were about  $43,424.000 adding  that to $26,847,000=70,27,.000( deducting the cash last quarter), 70,27,000-$56,716,000= $13,555,000

 

Their revenues Q1 were about $ 3 M below the average for 2020 which was a mix of profit warning and best revenues on record so really not much as a reference but that was their latest financial year results it was also a pandemic year. 

Their roughly calculated cash burn rate was about $10M in Q1 about $5 M higher than the historical average due to constant fees, paying CROs etc. Another thing to consider is those consultant fees for NASH were one of payments or/and will be much less in the future.

Going forward the revenues most certainly will increase but yes they will have to start funding the NASH trial on a proforma basis.

So considering better revenues going forward they should have equal to at the minimum 7 or more quarters of cash to fund their operations. If the revenues increases by compounded 20%/25% then they will have more time before next financing, cancer phase1 trial if successful and completed during 2022 then the SP should jump significantly also there will be many companies knocking on the door to get a piece of the pie.

As per CRO doing a quick search on the net, they invoice on a proforma basis monthly, quarterly or biannually and they don’t require a guarantee for the full trial, they can’t as no one knows how the trial progresses, if and when the sponsor defaults on payment they can stop the trial if they choose to. The CROs also are aware of the process how R&D companies need to raise cash periodically to fund ongoing trials. 

At this point I believe to worry about funds is a bit premature as if initially cancer is a success then there many scenarios where those needed funds in the future will be taking care of either partnership for either of their programs or an offering as much higher prices again I hope this conservative boards doesn’t panic and pull the trigger too early on the next offering in case they need to raise funds but regardless it won’t be until late 2022.

 

SPCEO1 wrote: For a trial that is going to last 3.5 years at a minimum, you do not need all the money for the entire trial up front. For example, GALT estimated their phase II/III trial would cost about $100 million and raised less than $50 million before launching it. That being said, we know another cappital raise is on the way despite the fact the company indicated the last one gave them a two year runway (I may not be remembering that precisely correctly, so feel free to correct me). It is also worth noting that cash can be raised via partnership agreements, either in NASH and/or in cancer.

Given the lack of internal NASH expertise, I  would not mind THTX giving up some of the upside in NASH to a partner in exchange for external validation of their project and cash. A total internal THTX focus on a promising cancer drug platform might also be a benefit for THTX oif they could find a partner to handle the heavy lifting on the NASH trial. But, THTX may need more cancer data before they can make that call. And even if they want to focus more on cancer and let someone else push their NASH program forward, it may not be simple to find that partner at a reasonable price given the IP issues, the weird way in which THTX got NASH to phase III and the unending debacles in NASH trials. 

But if cancer is looking very positive, the need to have to pursue NASH is reduced. If cancer somehow bombs out in the next couple of months, then they need NASH to have something investors could potentially get excited about. 

qwerty22 wrote:

This is a technical question more than anything. Don't you need the cash in the bank before you start a clinical trial?

I can't think of any circumstances where that hasn't happened. I can't think a CRO would start a trial without that sort of guarantee. Won't they need to do a cash raise before the trial?it seems like another reason to wait for shrinking tumour. A flurry of PRs going "shrinking tumour", "Nash Protocol", "financing", "patient enrolment".

 

SABBOBCAT wrote: It is king of fitting... We'd July 15, 2021 is a day that will never come... Just like the start of the NASH Phase III... I am joking of course, but come on, release the protocol already