3 junior healthcare stocks to buy

Mackie Research analysts Andre Uddin and Yue “Toby” Ma recently reviewed three junior healthcare stocks that they rate as ‘speculative buys’.

Appili Therapeutics Inc. (TSX—APLI)

Founded to advance the global fight against infectious disease by matching clearly defined patient needs with drug development programs, Appili Therapeutics Inc. joins Mackie Research analysts Andre Uddin and Yue “Toby” Ma’s coverage universe with a Speculative Buy. The analysts also give the healthcare stock a $1.60 target share price.

The analysts find that the company boasts a solid and diverse pipeline. “ATI-2307 is a novel anti-fungal that is advancing into Phase 2 trials for invasive fungal infections including those caused by Cryptococcus and Candida—the lead indication is cryptococcal meningitis, an orphan disease eligible for a priority review voucher (PRV) which has on average sold for US$140 million.

“ATI-1701 is a tularemia vaccine candidate being developed under the United States Food and Drug Administration (FDA)’s Animal Rule which only requires animal studies and one Phase 1 study for a Biologics License Application (BLA) filing. Besides being eligible for a PRV, ATI-1701 could also potentially win Biomedical Advanced Research and Development Authority (BARDA) stockpiling contracts, which could be worth several hundred million dollars.”

The company also boasts experienced management with “Dr. Armand Balboni who has all the key ingredients to be a great CEO. He was involved in significant drug development at the US Army as the Deputy Director, Office of Regulated Activities (ORA) and was senior reviewer on their clinical pharmacovigilance [drug safety] team.”

Appili Therapeutics is a drug-development company focused on developing novel anti-infective candidates that address urgent unmet medical needs.

Theralase Technologies Inc. (TSXV—TLT)

Theralase Technologies Inc. is conducting a Phase 2 pivotal trial with its lead asset TLD-1433 (a photo-dynamic therapy) in 125 patients with BCG-unresponsive non-muscular invasive bladder cancer (NMIBC). The trial should potentially support a regulatory application for the candidate via the FDA’s accelerated approval pathway. Theralase reported some early preliminary results of these trials. Bearing this information Messrs. Uddin and Ma maintain the stock’s Speculative Buy rating and $0.70 target share price.

Of the early preliminary results the analysts detail: “The pivotal trial has enrolled and treated 12 patients so far—four subjects, who should have continued the study, were mistakenly removed due to dated patient exclusion criteria. Of the 12 patients, three had a complete response (CR) (25 per cent) at 90 days post initial treatment.

“Investors should note the CR data is very early and could improve going forward for several reasons: the four patients who responded to the treatment could be re-classified as CR depending on further cystoscopy and urine cytology analysis. All of the 12 patients were under-treated due to inaccurate calculations of bladder volume and treatment time, which would negatively impact the efficacy of TLD-1433. Based on these findings, Theralase is optimizing the study protocol for future treatment, and five subjects have not received their second treatment yet.

“Based on the preliminary results, Theralase has an opportunity to optimize the treatment protocol of the pivotal study at an early stage—prior to ramping up patient enrolment.”

Theralase Technologies is a drug-and-device-development company focused on developing a paradigm-shifting photo-dynamic therapy for treating BCG-unresponsive, non-muscle invasive bladder cancer. Theralase also has a legacy-business segment marketing the company’s proprietary cool laser therapy devices for pain and inflammation management.

Theratechnologies Inc. (TSX—TH)

Theratechnologies Inc. took a page from Houdini’s playbook, coming out of lock-down wowing spectators. Messrs. Uddin and Ma noted total revenues lined up with consensus estimates. The analysts maintain their ‘Buy’ stance and $4.50 target share price.

Total revenues in the second quarter of 2020 were US$17.2 million versus the analysts’ estimate of US$18.2 and the Reuters consensus of US$17.2 million. Total revenues were US$15.6 million last year. Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) was US$1.5 million versus their estimate of US$500,000 and compared to US$500,000 last year. Net loss was US$5.8 million or US$0.08 per share, versus their estimates and consensus of US$3.6 million or US$0.05 per share.

In terms of product sales, Trogarzo generated US$7.9 million in sales versus the estimated US$8.5 million compared to US$7 million last year. The analysts view Trogarzo’s trajectory in the US as positive given the current COVID-19 situation.

This is an edited version of an article that was originally published for subscribers in the August 2020/Second Report of The MoneyLetter. You can profit from the award-winning advice subscribers receive regularly in The MoneyLetter.

The MoneyLetter, MPL Communications Inc.
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