RBC ups Theratechnologies to buy

Citing a recent sell-off and upcoming milestones, RBC Capital Markets upgraded Theratechnologies (TSX:TH) to “outperform” from “sector perform,” but kept its price target unchanged at $6.50.  The shares finished at $5.09 on Wednesday after touching a 52-week high of $5.61 earlier this month.

“Theratechnologiesis in the enviable position of having a number of important upcoming milestones that could propel the shares higher,” writes analyst Doug Miehm.  These include a FDA advisory panel meeting to consider the company’s tesamorelin HIV drug on May 27, and a new action date from the FDA for potential approval of July 27.  Given the anticipated approval date, he expects the drug to be launched in the second half this year.

Theratechnologies ended the first quarter with $55.3 million in cash, which Mr. Miehm figures is more than sufficient to take the company to sustainable profitability.  He also raised his 2010 earnings estimate to 24 cents a share from a loss of 18 cents previously.

Mr. Miehm cautions, however, that Theratechnologies is a “speculative-rated stock and investors looking to purchase today must be fully aware that if drug approval were delayed for some time, the shares would likely experience a material retracement.”  On the other hand, he believes the “data from the two Phase 3 trials were such that the outcome of the panel meeting should be positive and approval will likely be granted this year.”