BTG rallies as RBC hails long-term growth prospects

RBC Capital Markets initiated coverage of specialist pharmaceutical company BTG at ‘outperform’ with a price target of 820p, saying it should be a long-term holding.

It said the shares have underperformed materially over the past year and, while medium-term market expectations are still ambitious, the potential near-term approval of RePneu in the US and BTG's long-term growth prospects are fundamental reasons to own the stock.

RBC said the stock weakness has been almost entirely associated with the weak launch of the company’s varicose vein product, Varithena, but now presents an opportunity as the factors behind the selloff are being resolved and are short term.

“Given the advantages of this product over current technologies, we continue to believe Varithena could exceed management's $500m revenue target,” it said.

RBC said BTG’s RePneu – a memory coil for emphysema which could provide another option for patients on top of pharmaceuticals and an alternative to lung volume reduction surgery – is also critical and overlooked.

“With management still planning to submit RePneu for FDA approval in 2016, we remain optimistic for approval by end-2016, which should lead to a material re-rating.”

At 1403 GMT, BTG shares were up 6.6% to 664.50p.