Publicly traded biopharmaceutical firms can have large, sometimes triple-bagger, expectations placed on them by Wall Street analysts. This is especially true for companies like Trevi Therapeutics (NASDAQ: TRVI), which don’t yet have any products approved by the Food and Drug Administration (FDA). This means these firms may have little or no revenue, as is the case for Trevi.

A lot of projection goes into this. Analysts predict a company's chance of passing FDA trials and forecast the sales a drug may bring in after approval. The average price target for Trevi Therapeutics sits at $9. With a current share price of $3, this target represents a potential return of 200%.

Let’s break down the bull case for Trevi and also highlight some key risks for the firm. We’ll examine the company's flagship medicine, which Wall Street analysts are banking on for its success.

Trevi’s Flagship Drug: Haduvio

According to its pipeline, Trevi has one drug in development. It’s called nalbuphine ER and is marketed under the name Haduvio. Haduvio is currently in Phase 2 FDA trials for the treatment of two conditions: chronic cough in Idiopathic Pulmonary Fibrosis (IPF) and Refractory Chronic Cough (RCC).

Neither condition currently has medicines that are specifically approved for treatment. This is where the door opens up for Trevi to potentially make off big if its treatments gain approval, thus leading to investor optimism.

However, Haduvio isn’t the only game in town when it comes to developmental treatments for these conditions. Merck (NYSE: MRK) currently makes Gefapixant, a drug approved for treating RCC in the European Union, Switzerland, and Japan. It has shown efficacy, reducing cough frequency by 75% over a placebo. However, at the end of 2023, the FDA declined to approve the drug for treating RCC.

Haduvio’s Ability to Treat Multiple Conditions Is A Big Strength

IPF and RCC are two diseases with a common symptom: a chronic cough; however, they are very different otherwise. IPF is characterized by the scarring, or fibrosis, of lung tissue. This scarring stiffens and thickens the lung tissue, making it hard to breathe. RCC is simply characterized by an unexplained chronic cough lasting more than eight weeks but does not involve scarring.

The scarring aspect of IPF means the lungs get progressively more damaged over time, which means the condition can eventually become life-threatening. Most patients with IPF have a life expectancy of three to five years if they are not treated.

For this reason, IPF is a much more serious condition but is also much less prevalent. RCC affects approximately 200 to 500 of every 100,000 people, or 0.2% to 0.5% of the general population. Meanwhile, IPF affects just 13 to 20 people out of 100,000.

Haduvio has a significant advantage over Gefapixant. Researchers are studying Haduvio for both RCC and IPF but are only studying Gefapixant for RCC. This is important, as it gives Haduvio the ability to capitalize on both markets. This chart shows how Haduvio stands out from all other developmental treatments in this way.

Being able to treat both of these markets would be a great benefit to Trevi. It would allow them to cast an extensive net in treating RCC, likely for less revenue per customer due to the less persistent effects. Treating those with IPF who likely need sustained support to save their lives would create a larger revenue stream from each patient.

Nalbuphine has shown efficacy, reducing cough frequency by 50.8% over placebo. Due to the simultaneous improvement in patient-reported outcomes, a report on the National Library of Medicine website calls nalbuphine “the first therapy to show robust effects on chronic cough in IPF."

Only Time Will Tell if Haduvio Can Live Up to Expectations

Being in Phase 2 trials, Haduvio still has a long way to go before gaining approval and thus being able to make Trevi any money. Based on analyst estimates, the company isn’t expected to see significant revenue until 2028. That year, the average sales forecast sits at $87 million. However, analysts expect the number to increase tenfold to $884 million by 2031.

With a current market cap of $215 million, there is a case to be made that the firm’s value could increase significantly over the long term. However, with only 12% of drugs that enter trials ever actually gaining FDA approval, that revenue could also never materialize.