About the company:
Theratechnologies (TSE:TH), (PINK:THTCF) is a Canadian biopharmaceutical company that discovers and develops innovative therapeutic products.
The Company targets unmet medical needs in financially attractive specialty markets where it can retain all or part of the commercial rights to its products. Its most advanced compound, tesamorelin, is an analogue of the human growth hormone releasing factor. In 2009, Theratechnologies submitted a New Drug Application to the U.S. Food and Drug Administration, seeking approval of tesamorelin for the treatment of excess abdominal fat in HIV-infected patients with lipodystrophy. The Company’s growth strategy is centered on the commercialization of tesamorelin in the United States and in other markets for HIV-associated lipodystrophy, as well as the development of clinical programs for tesamorelin in other medical conditions.
About HIV-Associated Lipodystrophy:
Several factors including a patient’s antiretroviral drug regimen and the HIV virus itself are thought to contribute to HIV-associated lipodystrophy, which is characterized by body composition changes, dyslipidemia and glucose intolerance. The changes in body composition include excess abdominal fat accumulation. There is currently no approved treatment available for the excess abdominal fat in HIV-infected patients with lipodystrophy.
About tesamorelin:
Tesamorelin is a novel, stabilized analogue of growth hormone releasing factor (GRF). GRF is a hypothalamic peptide that acts on the pituitary cells in the brain to stimulate the synthesis and pulsatile release of endogenous growth hormone (GH).
Pipeline:
Tesamorelin’sanabolic and lipolyticproperties suggest opportunities in other clinical programs
-Multi-study Phase 2 programs completed
-Two ongoing NIH-sponsored independent studies in Growth Hormone Deficiency in Abdominal Obesity (GHDAO) and pre-Alzheimer’s
FDA status:
May 27, 2010, The FDA Endocrinologic and Metabolic Drugs Advisory Committee recommended by a 16 to 0 unanimous vote that tesamorelin, a growth hormone releasing factor, should be granted marketing approval by the FDA for the treatment of excess abdominal fat in HIV-infected patients with lipodystrophy, based on a favorable benefit-risk profile.
“We are pleased with the outcome of the Advisory Committee. This recommendation reinforces our belief that the tesamorelin benefit-risk profile seen in clinical trials in HIV-patients with excess visceral abdominal fat supports approval for this indication,” commented Mr. Yves Rosconi, President and Chief Executive Officer of Theratechnologies. “The Advisory Committee recommendation is another important step forward for the Company. It is especially significant for those patients who suffer from this serious metabolic complication, where today no treatment option exists,” Mr. Rosconi concluded.
The FDA has indicated that the action goal date, which is the target date for the FDA to complete its review of the tesamorelin New Drug Application, will be July 27, 2010.
In 2008, Theratechnologies entered into a collaboration and licensing agreement with EMD Serono, Inc. (an affiliate of Merck KGaA, Darmstadt, Germany), for the exclusive commercialization rights to tesamorelin in the United States for the treatment of excess abdominal fat in HIV-infected patients with lipodystrophy.
Financial Status:
- No financing required under current business plan
- CAD$57M on hand as of February 28, 2010
- Decreasing burn rate
- Potential upcoming milestone payments
- Launch in the U.S. market alone allows Theratechnologies to generate revenues
- 60.4M shares outstanding
- No dilution currently anticipated
- No debt
- Tax losses anticipated to shield income for 4 to 8 years (assuming U.S. launch only)
About the potential and number of patients:
how many patients have lipodystrophy in the USA today? 200k to 800k, based on the FDA documentation for the May 27th Advisory Meeting.
* So let’s assume 350k patients have Lipodystrophy. (which is conservative compared to the 800k given by the FDA)
* How many will seek treatment for their condition? 60% is a fair estimate: so this gives us 210k patients.
* Of the 210k patients, how may will use Egrifta? let’s assume10% penetration rate; about 21,000 patients (and I think EMD Serono can do a pretty good job at this since they already have an established relationship with the treating doctors)
About the potential price of the drug:
Similar drugs, like growth hormones can cost:
* Serostim: 36,000$ per year
* Other growth hormone: between 10,000$ and 30,000$ per year.
Therefore, let’s use $30,000 since Egrifta can provide similar benefits, without any of the serious side effects (also, I can’t see EMD Serono selling Egrifta below the price of Serostim….)
About the possible Stock Price:
* So we have 21,000 patients X $30,000 = $630,000,000 of sales for the USA only (to EMD Serono) per year.
* From this amount, Theratechnologies should get about 22% royalties, which represent $138,000,000 sales / per year, without taking in consideration any of the milestone payments (a total of $215 millions).
From the $138,000,000, let’s deduct $40,000,000 of operational cost (twice the current burn rate and pure guess of my part), for a total of about $100,000,000 revenue / year. (Please keep in mind that Theratechnologies did accumulate tax credits over the years…)
So $100,000,000 divided by the current number of shares (60M) : 1,66 EPS
1,66 EPS multiplied by a factor of 15 (which most of the analysts will agree for this industry): 25$ per share is possible in the long term 2011/2012, with expected incomes and full milestone payments.
In addition, add the potential for Brazil, Mexico, Canada, Europe, which altogether is comparable to the US…
Is $12 a realistic pps just after approval? If we look at the pps in June 2007, the price was $12.5…
And finally let’s not underestimate the size of the off-label market. (e.g: search Growth Hormone with Athletes in the news section of Google or Growth Hormone and Anti-Aging). Huge applications for the drug other than AIDS patients…massive potential here.
http://www.theratech.com/docs/fr/corpo/2010_04_23_Presentation_Corpo.pdf
The Clever Bull team.
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About Eric: Eric is a 38 year old, French Canadian, IT engineer. Eric has been an active investor in many biotech companies for more than 15years. Well on his way and starting his own company which can be found at, www.klinkoomedia.com |
