CIBC starts Theratechnologies at OP

CIBC World Markets initiated coverage of Theratechnologies (TSX:TH) with an “outperform” rating and $10 price target. The stock closed at $5.95 on April 19.

Theratechnologies has a focused strategy and business plan to build a sustainable specialty HIV/AIDS company. “With one successful product on the market, another one likely to gain approval later this year, and a solid balance sheet, the company is well positioned to execute,” writes analyst Prakash Gowd.

He said EGRIFTA is profitable on a standalone basis and will provide the cash flow to support corporate expenses and the launch of the company's second product, ibalizumab, in the U.S.

Theratechnologies has already expanded its commercial effort in preparation for the launch. EGRIFTA sales are expected to also benefit, with new 2017 guidance of $44-million to $46-million in sales.

“Ibalizumab is a company game changer,” Mr. Gowd said, adding that the drug will be a first-in-class drug for multi-drug resistant HIV when it likely receives approval later this year, and will fulfill an urgent need in the treatment of patients.

Given the scarcity of options to treat multi-drug resistant HIV, Mr. Gowd is forecasting a rapid uptake of ibalizumab, with peak sales of $446-million.

“We expect value appreciation between now and FDA approval of ibalizumab,” Mr. Gowd said, noting that small-cap biotech stocks are typically milestone-driven and react to clinical, regulatory and commercial events.

Theratechnologies' stock has already moved in response to clinical development success with ibalizumab,” he pointed out, adding that the next key milestone will be a near-term BLA filing, followed by the potential approval later this year.

“We recommend investors position themselves well in advance since we expect a valuation run into approval as the market gains comfort with the likelihood of ibalizumab being approved and commercialized in the U.S.,” Mr. Gowd said.