RE:Doug Loe: Speculative BuyDoug Loe raised his rating to Speculative Buy from Hold simply because the stock is too cheap relative to the value of its legacy drug franchise. He is defintely more optimistic about TH-1902 than myself, JFM and several others here and the other analysts. He also noted that there is an independent cognition study using Egrifta that should read out data in the middle of this year, so there is another potential lottery ticket out there. Remember, he is the analyst who kept highlighting Grinspoon's NASH study while I wondered why he was doing that given the patent situation. Well, he turned out to be right about that and Grinspoon did the work needed to produce new patents as well. So, you never know.
Here is a quick recap of the analyst reports. I have not seen anything from Canaccord yet.
Cantor - Stuck with a Buy and a $9 price target (which is based largely on NASH success). She had no value in her price target for cancer, so no need to make any adjustments in light of the unexpected TH-1902 setback. I am hoping she actually has some inkling that there is something on the NASH front going on and is looking to lead the share offering that might come on the back of any NASH partnership news. From my vantage point, Egrifta in NASH is a legit asset but I do not think the market is going to pay anything for it until a deal is in hand, just as it has not done so up until now.
Jones - Stuck with his Buy rating and $6 price target. Seems to think something might be possible in NASH but does not value it yet. Indicated doctors apparently like the idea of pairing up GILD's new MDR drug with Trogarzo. Said Marathon is supportive of THTX acquiring new commercial drug assets. Said more pre-cliniical TH-1902 research will likely be presented at the upcoming cancer meetings. He highlighted the PeptiDream PDC deals with Merck and Lilly totalling $3 billion potentially as an indicator of g rowing interest in the PDC space. He says he expects one-off medical affairs expenses and R&D to drop off post 2023, so he seems to be indicating THTX will pursue partnerships in cancer at that point. His $6 price target is based a lot on cancer so, he needs to address that at some point but likely is waiting to see what THTX chooses to do with TH-1902.
NBF - Leno has long been correctly dour towards THTX but actually had some positive comments in his report, mostly related to the renewed focus on the legacy drugs which he views as a less risky strategy for the company which can achieve results in the next twelve months. No change in his Hold rating or his low price target of C$3.25.
Research Capital - He maintained his Buy rating but dropped his target price to $4.50 from $6.20. He justfied the lower price target based on a later start to a presumed NASH trial and lower valuations now for Canadian drug companies generally. He thinks the eye side-effects from TH-1902 are a problem for the drug. He never had any value in his price target for cancer so he did not need to reduce his price target because of the TH-1902 setback.
From my perspective, the legacy business is likely worth US$3 to investors assuing they can keep growing sales as they have recently, bolstered potentially by the elusive product acquisitions they have been chasing for years. Investors will not give any value to TH-1902 at this point until some success is shown in human trials. Investors will also not give any credit for NASH until a partnership deal is signed. The JP Morgan annual healthcare conference is next week and this is often where deals get done. On NASH, this may be the last chance to get a partnership deal completed given greater enthusiasm for NASH assets post the MDGL results. Still, it is hard for me to see a really great partnership in NASH materializing after the long wait for one to be put together. Hopefully, I am wrong about that.
The Leede analyst is right, the stock is a Buy here because it is just too cheap. We have two potential positive catalyts in the next 2-3 months. First, a NASH partnership. Second, a better than expected outcome for TH-1902 as the trial data is examined closely for favorable indications. Both are realistic possibilities so, given the current exceedingly low expectations for either to materialize along with the already hammered down stock price, THTX is an interesting trade idea between now and the end of the first quarter or so. If neither opportunity does turn into anything worthwhile, you are left with a still very cheap stock versus the value of the legacy assets which THTX is now focused all the more on growing. So, as a trade at a minimum, THTX looks quite intriguing here. If either of the two opportunities comes up roses in the next couple of months, then maybe there remains a decent longer term case for the stock too.
Negative catalysts include potential insider selling (those options will be converted at some point) and trashing Q4 earnings with a lot of write-offs since the year ended badly anyway and positioning the company for a better future.
Also, there is a possibility a financial acquirer of THTX steps in to take advantage of how undervalued it is currently - remember they have a huge stockpile of accumulated tax losses that is valuable to someone.
archeo753 wrote: https://www.theglobeandmail.com/investing/markets/inside-the-market/article-fridays-analyst-upgrades-and-downgrades-for-jan-6/ In response to recent share price depreciation, Leede Jones Gable analyst Douglas Loe raised his recommendation for Theratechnologies Inc. (
) to “speculative buy” from “hold” following Thursday’s corporate update.
He said the recent “downdraft” was largely driven by the decision to voluntarily pause enrollment in the Phase 1 clinical trial of TH1902, its sortilin peptide-based cancer drug, and has widened the gap between his target price for its shares versus their present value.
“Ironically, the negative impact on TH share price that the Phase I TH-1902 halt last year imposed had no bearing on our fundamental valuation of the firm, and this continues to be the case in our ongoing investment thesis for the firm,” said Mr. Loe. “As before, our valuation is based on NPV (30-per-cent discount rate) and on ascribing multiples to our F2026 EBITDA/EPS forecasts (now US$31.6-million/US.12).
“In the medium term, the key value drivers for TH will be updates on its revised (and presumably FDA-endorsed) Phase I strategy for TH-1902 (we assume that no other sortilin peptide-conjugated drugs like doxorubicin-conjugated TH-1904 will advance into Phase I until ‘1902 Phase I testing concludes favorably) that we expect in coming weeks, and quarterly updates on sales trajectory for Egrifta/Trogarzo that we are optimistic will be consistent with guidance just provided.”
The analyst said there’s no major changes to his investment thesis stemming from the corporate update, which included projected sales for its Egrifta/Trogarzo commercial HIV-targeted biologics of US$80-million (versus Mr. Loe’s US$87.8-million forecast) in 2022 and US$90-$95-million (versus US$83.4-million) in 2023.
“F2023 revenue guidance seems reasonable to us at the low end, likely driven by Trogarzo growth from pandemic-constrained F2021/22 levels,” said the analyst. “We will provide commentary on our own Egrifta/Trogarzo sales expectations below, but our key takeaway is that our legacy expectations in retrospect were conservative and based mostly on Trogarzo upside from COVID-19-constrained F2021/22 levels, we agree that the low end of Thera’s F2023 revenue guidance represents a reasonable baseline expectation for collective performance of both drugs.”
While he expressing “caution” on TH-1902′s valuation, Mr. Loew endorsed “proceeding with Phase I activities for what we see as an attractive targeted anticancer platform,” maintaining a $3.75 for Theratechnologies shares. The average is $4.18.
Theratechnologies
1.55-2.13 (-57.88%)
Past year
=====