RE:RE:RE:National Bank On ThLet me first say that the stock is too cheap right now despite the problems the company now faces, which are significant on the financial side of the equation. THTX, like many investors, including myself, thought the chances were good that TH-1902 would achieve at least early stage success based of the really impressive pre-clinical work, the FDA backing that up with a very early Fast Track status designation and knowledegable cancer investors like Soleus taking a big stake. On the back of that presumed early stage success, one imagined THTX would be able to easily complete a sensibly priced share offering that would set them up financially to continue the testing on TH-1902 and cover other losses as they built out the legacy drug business. The surprise pause in the phase 1b trial has upended all that and now the focus has to be on cutting costs and raising revenues. Perhaps a NASH partnership deal would provide a small cash infusion that will help as well as a higher stock price from which THTX would launch a share offering to help buy them more time on cancer. Ideally, they would be able to flesh out cancer a little more theselves before pursuing a partner in that too but the money is not there for it right now in my opinion. There maybe medical reasons to pause TH-1902 for longer, or to ditch it altogether for a better Sort1+ option such as JFM has highlighted, but there are certainly financial reasons to slow or stop spending on TH-1902 if they do not partner with some other firm on it first. If the goal is cash flow positive operations, they need to cut costs. No cost cuts have been announced yet so we do not know what they are doing on that front yet. Clearly, phase 1b trial costs have been reduced due to the pause, but other than that, we don't know of any specific cost cuts already implemented or planned. But we do can reasonably assume they are going to be making cost cuts in order to get to cash flow positive by the end of the year.
First, I suspect THTX has a short window of a couple of months to capitalize on renewed interest in NASH to formulate the long desired NASH partnership. Investors will then need to evaluate the details of such a partnership to see what aid it might bring to the current situation. Second, we are also looking at 2-3 months to determine what, if any, path forward there might be for TH-1902. I am reading the conflicting statements in the press release as the chances of a longer pause in the trial is possible for financial reasons. It is also possible they discover that the whole MOA just is not viable as they study the data they already have from the trials and just have to shut the whole thing down. Whatever the situation is with cancer, we should have a better idea in 2-3 months max.
Investors are not going to give any value to NASH until a partnership is signed. They are also not going to give any value to cancer until good human data is produced. So, for now, the stock will be valued on the legacy drug business and the prospects for its growth. To me, that suggests a value of about $3 per share and a stock price of about $2 per share as there will always be a discount to the true value since the company has been a serial disappointer. But if the stock reached $2, that is a very sizable percentge gain from here, so it is worth holding, particularly until we know if there is a NASH rabbit in THTX's hat and what the deep dive into the cancer trial patients tells us about the prospects in cancer going forward. I have to believe there is something to work with in cancer but we really have to wait to see if the company can dig that out of the data and put forward a plan to move forward from both a clinical and financial perspective. Things could look a lot brighter in 2-3 months but there is clearly a chance we are left with just the legacy drugs after that time has passed as well.
PWIB123 wrote: I think I read the same, generally. Leno is repeating what Paul said in the open letter. I think it means that the opportunity to raise money is not on the table, and all further expenses will have to take place within the context of available cash flow. That's a pretty tight space to work within right now. I think you're correct in terms of the real possibility TH-1902 doesn't move forward in a meaningful way anytime soon, although Paul also makes the comment that the FDA will reply within 30 days of getting responses to their questions. That insights some sense of immediacy, but probably is more about transparency of expectations. They may even now be completely limited to partnering. They do leave the door open for possibility, so maybe they surprise with a NASH partnership that brings in the cash needed to keep funding TH-1902.
qwerty22 wrote: "However, any further investments in the development of these assets will be in the context of Thera achieving positive EBITDA / CF in f2023+"
What do people think of Leno's statement here? I think you could read Paul's letter like that. It might suggest that the plan is not to start the cancer ASAP but even if they get a path worked out there might be some delay while they improve things on the commercial side. This might be a pause/temporary hold that turns into another shelved program (for the time being). Is that how people are reading this?
archeo753 wrote: | National Bank on Theratechnologies |
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02:44 PM EST, 01/04/2023 (MT Newswires) -- Theratechnologies announced a few corporate updates this morning. National Bank's Endri Leno notes the updates with the most positives include: Focusing on commercial operations and cost containment with the goal of 1) achieving positive EBITDA / Cash Flow in f2023+; and 2) leveraging its existing U.S. commercial infrastructure to explore the addition of commercial-stage assets. Development of the oncology assets, which are very early stage and not aligned with TH's commercial platform, remains on hold - clinical trial paused by TH and on partial clinical hold by the FDA. The company continues to evaluate options and to answer FDA questions with the goal of submitting an amended clinical trial protocol. However, any further investments in the development of these assets will be in the context of Thera achieving positive EBITDA / CF in f2023+. Other (more neutral) updates: Ahead of Q4/f22 reporting in February 2023, TH announced that it has met its previously announced f2022 revenue guidance of ~US$80 million (vs. NBF at US$80.8 million & consensus at ~US$79.0 million). For f2023, TH is guiding to revenues of US$90 to US$95 million (vs. NBF at US$95.0 million & consensus at US$92.0 million). Takeaways Leno is encouraged to see Theratechnologies refocusing on growing and profitably operating its commercial assets. While execution will be key, the company appears well-positioned to turn a corner given 1) CEO's extensive (35+ years) industry and sales experience; and 2) TH's precedent of having generated positive EBITDA and/or CF from the same commercial assets. As Theratech's decision to focus primarily on its commercial assets is less risky (vs. early-stage oncology clinical trials) and, likely, to yield results in the NTM, NBF considers this update to be positive. However, given expectations of a generally challenging operating/economic environment (i.e., inflation, labor scarcity, potential supply chain disruptions, etc.) the return to profitability will be monitored closely. Maintain Sector Perform rating and $3.25 target Price: 1.53, Change: +0.20, Percent Change: +15.04 |
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