Analyst Reveals Undervalued Pharmaceutical Gem in Canada
Research Report

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Disclosures for Leede Financial Inc., Theratechnologies Inc., April 14, 2025

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On April 14, 2025, Leede Financial Inc. analyst Dr. Douglas Loe maintained a Speculative Buy rating and CA$7.25 target price on Theratechnologies Inc. (TH:TSX; THTX:NASDAQ), despite a recent acquisition offer from Future Pak LLC that values the company at US$205 million in upfront capital and up to US$255 million including performance milestones, asserting that the bid significantly undervalues Thera's long-term potential.

Future Pak LLC, a Michigan-based contract manufacturing firm, has made an offer for Theratechnologies that focuses primarily on the value of Egrifta (tesamorelin), Thera's FDA-approved HIV lipodystrophy drug, with no apparent value attributed to the company's other clinical and commercial assets. The deal consists of upfront cash valued at approximately US$4.46 per basic share and US$3.87 per fully diluted share (by the analyst's calculation), plus contingent payments of up to US$50 million based on Egrifta's performance over the next three years. These contingent payments will be triggered if Egrifta generates a cumulative three-year gross margin contribution of at least US$125 million, which Dr. Loe believes is readily achievable based on historical performance.

The analyst notes that while Future Pak's bid represents a premium to Theratechnologies' recent share price, it falls well short of where the stock traded in the post-2020 period and significantly below his CA$7.25 target price. Dr. Loe's valuation is based on net present value (15% discount rate) and multiples of his F2027 EBITDA/EPS forecasts, which are exclusively based on Egrifta/Trogarzo commercial economics and do not include potential contributions from TH1902 or the newly licensed Ionis Pharmaceuticals antisense drugs olezarsen and donidalorsen.

Importantly, Theratechnologies has indicated in a press release that it has a competing offer from another potential acquirer, suggesting that a competitive auction could be developing. While the identity of this competing bidder has not been disclosed, Dr. Loe speculates it may be a specialty pharmaceutical firm with existing U.S. marketing infrastructure and an infectious disease franchise already in place.

For fiscal 2024, Theratechnologies reported revenue of US$85.9 million, with Egrifta generating US$60.1 million in gross revenue and US$53.0 million in gross margin (88%). The company's F2025 guidance calls for revenue of US$80-83 million and EBITDA of US$10-12 million, which reflects a US$10-12 million revenue reduction due to inventory and supply chain issues that the analyst does not expect to recur in future periods.

Dr. Loe argues that halting TH1902 clinical testing (recently focused on advanced ovarian cancer) would be accretive to EBITDA simply by eliminating R&D expenses, which have totaled approximately US$91.5 million since the acquisition of Katana Biopharma in February 2019. He calculates that without these TH1902-related expenses, Theratechnologies would have generated an adjusted cumulative EBITDA of US$87.0 million over the past six years instead of the reported negative US$4.5 million.

With the share price at the time of the report at CA$2.70, the CA$7.25 target price represents a potential return of 168%, independent of any momentum generated by the acquisition offers.