BTG’s (LON:BTG) stock is down 21% in the year to date – but the sell-off has gone far enough, according to City broker Investec.
The retrenchment is linked to worries over the “long-term quality” of the biotech’s earnings stream.
Specifically, investors are concerned the potential of BTG’s varicose vein treatment Varithena has been over-stated.
Sales of the revolutionary foam were disappointing last year at just US$1.6mln.
Investec’s drugs team led by Nicholas Keher has done its own market research, which goes some way to calming nerves over the product.
It has spoken to doctors trained to use Varithena and says it is “confident there is a place for this product in the market” with the feedback on speed of use and efficacy “positive”.
There are, however, two “reimbursement bridges to crossed”, it added.
Specifically, there is limited insurance coverage, which is said to be “affecting end-market adoption”, and where insurance does exist physicians are waiting between six and nine months to be paid.
In the note, Investec said it had tweaked earnings forecasts to reflect a slower than expected uptake of Varithena.
Its share price target has been lowered from 1,135p, but at 961p the new price objective still offers 30% upside if hit.
In a note entitled Not a Bridge Too Far, Investec told investors: “We believe the negative share price reaction due to investor concerns on the long-term quality of BTG’s earnings profile, and Varithena in particular, has been overdone.
“After interviewing physicians and market access experts to reappraise Varithena, we consider the product to be better positioned than the market is pricing in, albeit it will take time to overcome specific hurdles.
“With this now captured in our updated estimates and valuation, we think investors should look to build a position given the attractive discount.”
At the 3.30pm, the shares were changing hands for 624p – down 2%, mirroring the wider market sell-off.