Market A bit for JFM and others on things they can watch for in the future, as he had asked about that a few days ago. Like it’s been said up here, emotionally getting burned is really hard to take and it’s no surprise some investors could care less there’s a company underneath there somewhere and are getting out. Can’t really blame them and you either jump in with them or painfully sit through it and see THTX plans. The immediate emotional exit will be bumpy but will slow at some point. It always does. Turnaround guys will buy and point to crazy low valuations, at some point reassurance about revenue growth from mgmt will create some stability and point to a company that just booked $80m in sales and grew at 15%, expecting it to keep growing to $90mil+ and getting to breakeven fast. At some point, CEO will have to talk about that underlying business and how he will get back to maximizing its value for shareholders. Somewhere in there they’ll get a bounce back to fairer value that reflects what he’s doing and the assets. Oddly, the analysts will be seeing what they always wanted to see and probably cheer it on for what that’s worth.
JFM asked what’s the take on the ongoing value and funny enough, that’s the only thing the analysts were really looking at anyway to come with their investment thesis. That’s your best guide JFM. They (and Palin, Sabbo and others) always thought there was ok underlying value with close to $80mil of revs that you can take to $90mil+ next year and $100mil+ after that with margins widening throughout. It appears some of those changes they’ve talked about on patient retention, new sales approach, widening patient audience, and margins can help around the edges and add up to something. That mostly gets analysts to their $3+ values for the stock. It's a reasonable take. The new addition to the equation on top of what they’ve done with sales lately will be cost cutting. That’s not yet in their models but will be after strategy “right-sizes” them. It will be looked on positively by analysts and they’ll have to see some of that laid out —it has to happen. It’s the explosive pipeline upside that could have gotten us to $10 or more in the short term, while not yet gone, certainly diminished. Things change, but investors will only be buying for a company that could show $100mil sales after next year and be making its way to breakeven and then profits to show if they can get there. The analyst models and valuations around that are probably your best guide on the steady state -$3+.
Pauls job is to make sure as much of that revenue growth makes its way to operational profitability as possible. It can no longer be shared as highly with RD (unless science gets proven up or partnerships happen) and all non-sales related expenses. The one nice thing about new sales growth is that no one in the company has a claim to it. You achieved that new sales with the same or lower costs structure, so it filters further down the income statement. He’s got some decent numbers to work with over the next two years —assume he has $20-$22mil in new revenues and gets costs down $15-30mil - that’s a wide swing in cash flow and bottom line on a small company. Operations used up around 25mil of cash this year, so some combination of sales growth and cuts has to fill that hole. It's doable. 2022 had a non-cash write down of the European rights and other things of around $10mil so that’s not a hole you need to fill. He doesn’t have much of a choice. Stocks usually respond to plans to get to positive cash flow and then they can raise capital if he needs to at much fairer valuations later. I realize stating all that is easier than getting there and they may see bumps or maybe tailwinds, but that’s what almost every management would do. There’s wildcards out there, like a firm getting interested in assets like NASH rights or something else, but CEO can’t budget on those. Analysts and the big shareholders will applaud all that and as it comes through it should help.
It’s also a touch funny that we finally now see THTX listed in a lot of those NASH tables and tesamorelin mentioned more than when they were actually publishing on it. So it gets in those talks in the market around FDA approved late-stage molecules. It’s nice to see some of those players are succeeding and maybe they strengthen demand for ready projects again as they could certainly use some good news around that market finally being a commercial market worth pursuing. Don’t get me wrong, I wouldn’t attach much there yet and it’s also a prove it to me in the pipeline. All I can see is that sentiment might actually touch on it if someone mentions that molecule in the conversation around NASH and that it’s actually one of the very select few FDA approved 2b/3 ready to go drugs. That’s all my point is.
That’s sort of a forward outlook that’s reasonable to contemplate, in line with a bunch of the analysts thoughts and what to see coming soon. Analysts ended up being right, they’ll get on board with the revenue growth and breakeven or profits in the future, the explosive pipeline growth is fully in prove it to me mode, they need to make their science work. For what it’s worth, downside seems pretty darn low now but it’s emotional, so bumpy, and the proverbial bounce will come about once Paul lays out a clearer picture around a lot of things we’ve been talking about.