Can This Biotech Return 100% in 2019?

Theratechnologies'(TSX:TH) stock is on the verge of breaking out. In full growth mode, the company is a good bet for triple-digit returns.

| More on:

It’s tough to find reliable Canadian pharma and biotech companies. In Canada, the industry is largely dominated by small to mid-cap companies. The problem with this is that investors who require a level a safety usually look south of the border and invest in the larger industry players.

There are however, some high-quality biotechs in Canada worthy of investor attention. Case in point, Theratechnologies (TSX:TH). Theratechnologies is “is focused on addressing unmet medical needs by bringing to market specialized therapies for people with orphan medical conditions, including those living with HIV.”

To keep it simple, it targets niche markets that are largely ignored by the larger biotechs. The strategy has worked well thus far and the company is on the verge of breaking out.

Strong performance

Over the past year, Theratechnologie’s stock has return 17%. Not bad. However, it is currently trading near the bottom end of its 52-week range and is down 42% from its 52-week high of $14.75.

The large swing in prices have nothing to do with fundamentals. Two weeks ago, the company released record fourth-quarter and year-end results. Net sales in 2018 increased to $58.533 million, up 36% over the last fiscal year.

Its flagship EGRIFTA product, the backbone of the company, increased sales by 10% year-over-year. Its second flagship, Trogarzo, which was only available commercially in the U.S. in April of 2018, achieved $11.610 million in sales.

As a result of strong sales, the biotech is now generating positive EBITDA and strong cash flow, exiting the year with $71 million in cash and short-term investments – cash that the company is deploying towards R&D and acquisitions to further expand its pipeline of products.

Strong growth ahead

The best part about Theratechnologies’ is that its growth story is just beginning. Management believes Trogarzo can equal or surpass EGRIFTA’s run-rate within a year of being on the market. In the long run, it believes Trogarzo “has the potential to be at least five times bigger than EGRIFTA.” This is a game-changing drug with significant potential.

As of writing, Trogarzo is only available in the U.S., but the drug has been fast-tracked by the European Medicine Agency (EMA) and a decision is likely within the next quarter. This will be a huge catalyst for the company.

Further to its cash buildup, post-earnings it announced the acquisition of Katana Biopharma Inc and its targeted oncology technology platform. This all-cash transaction furthers the company’s strategy to build out its pipeline of early-stage specialty products.

Foolish takeaway

The future is bright for Theratechnologies. EGRIFTA continues to grow at a double-digit pace, and Trogarzo is proving to be a game-changer for the company. It won’t take much to move the needle.  Once Trogarzo is approved for commercialization by the EMA, the company has the potential for triple-digit returns.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor mlitalien owns shares of THERATECHNOLOGIES.

More on Investing

dividends grow over time
Investing

Opinion: Your 2025 Investing Plan Should Include These Growth Stocks

Here are three top Canadian growth stocks long-term investors may want to consider right now.

Read more »

ETF chart stocks
Investing

These Are My 2 Favourite ETFs to Buy for 2025

iShares Core MSCI All Country World ex Canada Index ETF (TSX:XAW) and Vanguard All-Equity ETF Portfolio (TSX:VEQT) are strong options.

Read more »

calculate and analyze stock
Dividend Stocks

TFSA Investors: 3 Dividend Stocks to Consider Buying While They Are Down

These stocks offer attractive dividends right now.

Read more »

data analyze research
Dividend Stocks

Top Canadian Stocks to Buy Right Away With $2,000

These two Canadian stocks are the perfect pairing if you have $2,000 and you just want some easy, safe, awesome…

Read more »

money goes up and down in balance
Dividend Stocks

Take Full Advantage of Your TFSA With These 5 Dividend Stars

Choosing the right dividend stars for your TFSA can be tricky, especially if your goal is to maximize the balance…

Read more »

TFSA (Tax free savings account) acronym on wooden cubes on the background of stacks of coins
Dividend Stocks

The Best Canadian Dividend Stocks to Buy and Hold Forever in a TFSA

These three top dividend stocks are ideal for your TFSA due to their consistent dividend payouts and healthy yields.

Read more »

open vault at bank
Dividend Stocks

1 Magnificent TSX Dividend Stock, Down 10%, to Buy and Hold for a Lifetime

A recent dip makes this Big Bank stock an attractive buying opportunity.

Read more »

Canadian Dollars bills
Dividend Stocks

2 Incredibly Cheap Canadian Growth Stocks to Buy Before It’s Too Late

Buying cheap stocks needs patience and a long-term investment approach. Only then can they give you extraordinary returns.

Read more »