Chronic Cough Platform And Strong Cash Runway Will Support Future Upside Potential

Catalysts

About Trevi Therapeutics

Trevi Therapeutics is a clinical stage biopharmaceutical company developing Haduvio, an extended release formulation of nalbuphine, for multiple chronic cough indications where there are currently no FDA approved therapies.

What are the underlying business or industry changes driving this perspective?

• Multiple late stage chronic cough programs across IPF, non IPF interstitial lung disease and refractory chronic cough, all built on the same drug and mechanism, create the possibility of one clinical platform addressing several underserved patient groups, which could support a broader revenue base if trials are successful.
• Positive data from the CORAL and RIVER studies and clean drug drug interaction and interim respiratory safety readouts reduce key development questions raised by regulators, which can lower perceived program risk and support the path toward potential future earnings from IPF chronic cough.
• A large and currently untreated chronic cough population in IPF and non IPF fibrotic lung disease, seen by overlapping pulmonologist prescribers, gives Trevi the chance to leverage one commercial footprint across multiple indications, which can help operating leverage and net margins over time.
• Growing attention from pulmonologists and key opinion leaders at conferences such as CHEST and ERS, along with investigators asking when new trials will start, suggests strong clinical interest that may translate into efficient trial enrollment and, if approved, faster uptake, which would directly affect future revenue streams.
• A cash and investments position of about US$195 million and stated runway into 2028 supports full funding of the next Phase III and Phase IIb/III programs without relying on near term equity raises, which can reduce financing overhang and keep more of any eventual earnings power with existing shareholders.

Assumptions

This narrative explores a more optimistic perspective on Trevi Therapeutics compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts. How have these above catalysts been quantified?

• Trevi Therapeutics currently has no revenue. The bullish analysts are forecasting revenue to reach $334.8 million by March 2029.
• As a pre-revenue company, The bullish analysts expect Trevi Therapeutics to achieve a profit margin of 60.1% in 3 years time.
• The bullish analysts expect earnings to reach $201.3 million (and earnings per share of $1.13) by about March 2029, up from -$45.9 million today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as $-224.4 million.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 25.8x on those 2029 earnings, up from -36.1x today. This future PE is greater than the current PE for the US Pharmaceuticals industry at 19.5x.
• The bullish analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.98%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• Trevi remains a loss making, pre revenue company that is committing to multiple large trials in IPF chronic cough, non IPF interstitial lung disease and refractory chronic cough at the same time, so any delay, protocol change or need for extra studies could extend timelines and increase R&D and G&A cash burn. This would likely pressure earnings and could eventually force new equity raises that dilute future earnings per share.
• The entire investment case rests on Haduvio in chronic cough across several fibrotic lung conditions. Management acknowledges that the FDA is still defining the required Phase III design, safety database size and additional drug drug interaction work. If regulators ask for broader safety data, more Phase I studies or different endpoints, that could raise development costs and push out any potential revenue from these programs.
• Management highlights a growing focus on antifibrotic drugs such as pirfenidone, nintedanib and newer therapies like those from United Therapeutics. While they argue these treatments do not address cough, wider adoption of disease modifying drugs and evolving treatment algorithms could change how pulmonologists prioritise cough therapies, which may limit Haduvio uptake and reduce the revenue contribution that analysts are currently assuming for chronic cough.
• The company plans to broaden eligibility in upcoming Phase III and RCC trials to look more like real world practice, including patients with multiple comorbidities and concomitant medications. Future required drug drug interaction studies related to CYP 2C9 and 2C19 may highlight interaction constraints. If safety or tolerability in this more complex population is less favourable than the current dataset, that could weigh on physician confidence, lower potential prescribing and put pressure on both revenue and net margins due to higher support and monitoring costs.
• Trevi’s cash and investments of about US$195 million are expected by management to fund several Phase III and Phase IIb/III programs through at least 2028. This runway is explicitly described as subject to finalising development plans, so any cost inflation in global clinical operations, site expansion or SOX 404(b) compliance could shorten that runway and increase the risk of future capital raises that impact existing shareholders and the company’s ability to convert expected revenue into earnings.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The assumed bullish price target for Trevi Therapeutics is $27.0, which represents up to two standard deviations above the consensus price target of $21.55. This valuation is based on what can be assumed as the expectations of Trevi Therapeutics's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $27.0, and the most bearish reporting a price target of just $16.0.
  
• In order for you to agree with the more bullish analyst cohort, you'd need to believe that by 2029, revenues will be $334.8 million, earnings will come to $201.3 million, and it would be trading on a PE ratio of 25.8x, assuming you use a discount rate of 7.0%.
  
• Given the current share price of $12.92, the analyst price target of $27.0 is 52.1% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.