Leede Financial Inc. analyst Dr. Douglas W. Loe, in a research report published on July 10, 2024, provided an update on Theratechnologies Inc. (TH:TSX) following the company's fiscal Q2 2024 financial results. The analyst maintained a Speculative Buy rating and a target price of CA$8.00 on the stock.
Theratechnologies reported robust FQ224 financial data, showing significant sequential growth in both revenue and EBITDA.
"FQ224 sales for the firm's HIV lipodystrophy-targeted stabilized long-acting growth hormone-releasing factor Egrifta/tesamorelin were notably strong in the quarter, achieving the second highest quarterly gross revenue value in the firm's public markets history," Loe noted.
The analyst highlighted that while Trogarzo sales were solid but unspectacular, "it is clear from consolidated financial data that Egrifta revenue and gross margin strength contributed substantially to record EBITDA/margin for the firm, even before adjusting for oncology-based R&D expense that we conventionally calculate as a separate profitability measure."
Loe emphasized that Theratechnologies maintained its fiscal 2024 revenue guidance of US$87M-to-US$90M for Egrifta and Trogarzo combined, as well as its EBITDA guidance of US$13M-to-US$15M. "With FQ224 revenue run-rate on pace to meet the low end of that range, we believe that our unchanged F2024 product revenue forecast (also at the low end of the range at US$87.2M) has been measurably de-risked by FQ224 performance," the analyst stated.
Theratechnologies' strategic focus remains on its HIV-focused specialty pharma business, with ongoing Phase I oncology activities in the background. The company's strong financial performance in FQ224, particularly from Egrifta sales, demonstrates its ability to execute its core business while maintaining cost discipline.
Leede Financial's valuation methodology for Theratechnologies is based on a combination of net present value (NPV) and multiples of forecasted EBITDA and EPS.
"Our valuation still based on NPV (15% discount rate, justifiably low in our view based on legacy revenue/EBITDA generated by flagship HIV commercial assets) and multiples of our F2026 EBITDA/EPS forecasts (US$27.5M & US$0.22/ respectively)," Loe explained.
With a Speculative Buy rating and a target price of CA$8.00, representing a potential return of 281% from the price at the time of the report of CA$2.10, Leede Financial sees significant upside potential for Theratechnologies.
The analyst concluded, "Bottom line — maintaining rating/PT on the strength of increasingly profitable HIV-focused specialty pharma firm, independent of Phase I oncology activities transpiring in the background."
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Disclosures for Leede Financial Inc., Theratechnologies Inc., July 10, 2024
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