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Theratechnologies Inc (OTCMKTS:THERF) Is One To Watch In Biotechnology

Theratechnologies Inc (OTCMKTS:THERF) Is One To Watch In Biotechnology
Written by
Chris Sandburg
Published on
October 9, 2017
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When we first looked at Theratechnologies Inc (OTCMKTS:THERF), Donald Trump had just been confirmed as President-elect of the United States a few hours earlier and we noted that, while the world was distracted with that development, the company might present a nice opportunity to jump into a discounted exposure in the biotechnology space. THERF Daily ChartAt that time, Theratechnologies went for around $2.50 a share. At its most recent close, the company traded for $6.31 – a more than 152% gain across the 10 or so months subsequent to our coverage. Current prices, however, are down around five percentage points from last month's highs and we think this dip is an opportunity to, yet again, pick up some cheap shares ahead of future upside reevaluation.Here is what we are thinking.The reason that the company is down a little bit from highs is that it just put out third-quarter financials and the headline figure from these financials (i.e., the number that features as a header for all the coverage across financial news media) was a net loss of a little over $2.8 million during the three months to end August this year. Look a little deeper, however, and the net loss is far from representative of the underlying value here.The company generated more than $11 million in revenues for these three months, bringing total 2017 revenues (the first nine months of the year, that is) to a little over $30 million – up from the $26 million generated during the same period last year. The primary (and only really) revenue driver is Egrifta, an injectable prescription medicine to reduce the excess abdominal fat in HIV-infected patients with lipodystrophy, which is approved in both the US and Canada as things stand and is quickly growing its market share in both regions.But it's not this that we are looking to as the primary growth driver over the coming 6 months.Sure, it's nice to be generating tens of million dollars in revenues from a couple of major markets in an indication that your drug dominates, but there is a second asset called ibalizumab in the picture and it could be a real game changer for Theratechnologies, even against the backdrop of an already successful commercial asset.It's under investigation as a potential therapy for patients with multidrug-resistant HIV, which is a real unmet need in the US right now, and the company submitted a biologics licensing application (BLA) to the FDA for the asset back in May this year. Subsequent to submission, the agency quickly accepted the application and set a PDUFA date for the drug of January 3, 2018.If the asset is approved, it will be targeting a peak sales estimate of just shy of half $1 billion, around $100 million more than the company's current entire market capitalization. The real opportunity here, therefore, is to load up on shares ahead of PDUFA and in anticipation of the FDA giving the drug a regulatory green light, decision day.We just got some data strongly reinforcing the safety and efficacy of the drug across a 6 month extension period, and reinforcing the already strong application that's with the FDA right now.Cash on hand is around $30 million (as of the end of August) and Theratechnologies will probably need more than this to guarantee a successful commercial launch for ibalizumab, so keep in mind that there is a chance of an equity raise near term. With that said, however, the downside impact of any such rate is dwarfed by the potential reward on offer if and when the FDA approves the drug in question.Check out our previous coverage of this one here. We will be updating our subscribers as soon as we know more. For the latest updates on THERF, sign up below!Image courtesy of NIAID via FlickrDisclosure: We have no position in THERF and have not been compensated for this article.

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