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Bullboard - Stock Discussion Forum Theratechnologies Inc T.TH

Alternate Symbol(s):  THTX

Theratechnologies Inc. is a Canada-based clinical-stage biopharmaceutical company. The Company is focused on the development and commercialization of therapies addressing unmet medical needs. It markets prescription products for people with human immunodeficiency viruses (HIV) in the United States. The Company's research pipeline focuses on specialized therapies addressing unmet medical needs... see more

TSX:TH - Post Discussion

Theratechnologies Inc > The company and only the company
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Post by scarlet1967 on Apr 10, 2021 7:00pm

The company and only the company

Isn’t an efficient market supposed to discount back the value of a R&D company to the risk-adjusted NPV in order to put a price tag on their science?
It is fairly easy to calculate the valuation of biotech companies when they are at commercialization stage but it all gets a bit more complicated when they are at various development phases having said that there is a value for each and every stage during the process. Over $200 price tag on the company’s share price (as per some suggestions here) based on Immudonmedic's $21 billion deal for a developed drug (using real world evidence of comparable drugs as a reference) is the easy way to do it or we can consider many factors such as size of the targeted market, potential market share, price and net profit margin of the drug etc. etc. to come to that number.
Once a biotech starts their program the process goes through phases of research, testing, and FDA review, during any of those phases the drug can fail therefore analysts create a discounted cash flow and choose a probability discount rate to value the program, they call it the risk adjusted NPV which again includes two main factors projected cash flows and the probabilities for the failure/success.
The cash flow projection has two parts the development cost which is done by putting together a proforma budget analysis by the company the second part is the market revenues again the company needs to look at the prevalence of the condition, the potential market share, the geographic of targeted market, how many patients will actually take the drug for their condition, price of the drug, the gross margin, marketing expenses, SG&A, etc. to estimate the market revenues.
The probability scenario as per UCSD are for  phase1, success probability of the stage is 65% and overall approval success is 15 %(90%x65%x40%x65%=15%) phase 2, 40% and 23%, phase 3, 65% and 59% and IND 90% (for approval and that stage).
Now when we have the projected cash flow and probability of success, we can do the risk-adjusted NPV, quite frankly there are few other factors which should be considered but let’s go with simple math so let’s say the RBC analyst and his market revenue projection is correct and  Gilead did a decent job of calculating the projected cash flow therefore let’s  use the price tag for  the Immudonmedic's $21 billion deal as a reference and a share price of over $200 at the finish line then apply the 15% probability to the equation for company’s phase 1 trial,  we end up with $30 share price for the phase1 trial now of course that would be the full value of a successful phase1 which could be several months from now but one would anticipate as the residual risks are decreasing with the progress of the phase 1 therefore some of that value should already has been ascribed , we could do the same exercise with NASH Phase 3….
This is the case for many other R&D biotech’s valuation which hasn’t been really the case for THTX. This is why the company needs to make more efforts and breakdown all these numbers and give it to the market in a silver platter. The company’s valuation is misunderstood and the company and only the company has to put it right. This is the job of the IR department with or without many years of experience.
 
Comment by houbahop on Apr 10, 2021 7:18pm
"Isn’t an efficient market supposed to discount back the value of a R&D company to the risk-adjusted NPV in order to put a price tag on their science?" This company has a proven track record of spending R&D money on products that do not generate value. They have spent over $300m on products that did not generate a single penny to its shareholders. This is a proven, undeniable ...more  
Comment by Bucknelly21 on Apr 10, 2021 7:21pm
That's completely false r and d is what it is there is always a potential value to a specific project 
Comment by scarlet1967 on Apr 10, 2021 7:40pm
That was the point that value hasn't been ascribed to THTX..
Comment by Bucknelly21 on Apr 10, 2021 8:31pm
Yes but my take was he was saying it's worth zero because the market deems it so?
Comment by scarlet1967 on Apr 10, 2021 9:24pm
My point is always been the market needs to be educated...if the market isn't ascribing a fair value to the R&D programs there is a problem which in my opinion in case of THTX  is an insufficient communication and it has to be addressed. For instance today as mentioned earlier the company should make those presentations available rather than charging investors. The cost of that should ...more  
Comment by Bucknelly21 on Apr 10, 2021 9:43pm
Yes totally agree, I personally think Leah is not the issue. I think it's possible since she reports to Phillipe she may be hamstrung 
Comment by realitycheck4u on Apr 10, 2021 10:16pm
This post has been removed in accordance with Community Policy
Comment by bfw on Apr 10, 2021 7:26pm
So, I guess you only value companies as worth anything after they have been sold or once they start paying regular dividends? Darn, I guess I better liquidate all my Shopify stock that I bought 4 years ago as they've never made shareholders any money. They've spent billions on acquisitions and building their business but I guess it was all for not! bfw  
Comment by houbahop on Apr 11, 2021 7:58am
Your are implying things I did not say and you do not answer the question. Are you dllusional? What value did pass R&D $$$ generated for Theratechnologies shareholders? Can you place an approximate number other than "zero"? What makes you think their present R&D investments will give different results? Simple question, and the answer will enlight you.
Comment by realitycheck4u on Apr 11, 2021 8:37am
This post has been removed in accordance with Community Policy
Comment by scarlet1967 on Apr 11, 2021 10:28am
I put this person on ignore and now I know why. The company has a good track record getting drugs approved which is also one of the factors to value a R&D company. If that $300 million is correct that is quite a low cost  to develop a drug from the get go to approval also I am not sure that number includes the work the company has done to assist Taimed getting Trogarzo approved in the ...more  
Comment by Lee430 on Apr 11, 2021 11:37am
Wasn’t is mentioned here some time ago that someone in Greenspoon’s research group was also collaborating with Pfizer on a project and that Pfizer was most likely aware of the NASH research, was thinking Pfizer should have some fresh capitol from the Covid vaccine profits that would be needing a home and Thera sure would be an attractive place to park it right now…..SP of $200 sounds exciting but ...more  
Comment by Wino115 on Apr 11, 2021 11:47am
Good for you Lee! I'm still hiding everything from my wife. I wouldn't sell at $2bil, that's peanuts if either program works out. I don't think Paul would either.  He's young and has a rare chance to make his company into something quite large if he let's it all play out. I also think the developments will happen so quickly if they are positive that the market cap will ...more  
Comment by qwerty22 on Apr 11, 2021 12:30pm
I think the company you are thinking of is Novo Nordisk.
Comment by houbahop on Apr 11, 2021 3:27pm
This is why I am long TH. The technical formation could not be better as we speak. A little resistance at $5.25 but after this the rounding bottom should bring share price at $8 without to many hurdles. As for the fundamentals, they might working on something big but we'll see how good they have become in execution.
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