Prefilled Syringe Launch And Pipeline Trials Will Expand Global Reach

Key Takeaways

• Strong pipeline potential from advanced Phase III and proof-of-concept studies could drive new product approvals and market expansion, boosting revenues.
  
• Planned launches and market expansions, including new VYVGART indications, could broaden global market presence and enhance financial health.
  
• Competitive pressures, regulatory risks, and high R&D costs could challenge argenx's market share, margins, and profitability, despite innovation efforts.

Catalysts

A commercial-stage biopharma company, develops various therapies for the treatment of autoimmune diseases in the United States, Japan, China, the Netherlands, and internationally.

• The introduction of a prefilled syringe for self-administration in the U.S. is expected to be a key driver of growth, facilitating earlier usage across the treatment paradigm. This is likely to increase patient numbers and thereby impact revenue growth positively.
  
• The progression of 10 Phase III studies and 10 proof-of-concept studies across their assets suggests a strong pipeline potential, which could lead to new product approvals and subsequent revenue increases and market expansion.
  
• The planned launch of new indications for VYVGART, including seronegative and ocular MG, could expand the addressable market, potentially increasing revenues through greater market penetration.
  
• Future regulatory approvals and geographical market expansions (such as the prefilled syringe and CIDP in multiple regions, including Europe and Canada) are poised to broaden the global market presence, impacting revenue by opening up new market opportunities.
  
• The transition to profitability in 2025, driven by commercial success, cost management, and strategic investments in R&D, indicates potential future earnings growth and improved financial health.

argenx Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming argenx's revenue will grow by 38.6% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 37.1% today to 35.4% in 3 years time.
• Analysts expect earnings to reach $2.1 billion (and earnings per share of $25.35) by about May 2028, up from $833.0 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $3.1 billion in earnings, and the most bearish expecting $1.3 billion.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 28.0x on those 2028 earnings, down from 47.3x today. This future PE is lower than the current PE for the GB Biotechs industry at 44.4x.
• Analysts expect the number of shares outstanding to grow by 2.83% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 5.23%, as per the Simply Wall St company report.

argenx Future Earnings Per Share Growth

Risks

• The competitive landscape in CIDP and other indications poses a risk, as new entrants or advancements by competitors could outperform argenx's offerings, potentially affecting future market share and revenue growth.
  
• The anticipated increase in gross-to-net due to self-administration of VYVGART may not fully offset potential pricing challenges across different markets, impacting net margins.
  
• Regulatory approval risks, such as the upcoming FDA PDUFA decision for the prefilled syringe, could delay or affect market expansion strategies and projected earnings if not favorable.
  
• The robust R&D investment strategy, while crucial for innovation, leads to high operating expenses, which could pressure net margins and delay profitability if new products don't succeed in the market.
  
• Dependence on favorable financial conditions, such as the recognition of deferred tax assets, highlights potential vulnerabilities if market conditions or financial strategies shift unfavorably, affecting net earnings.

Valuation

• The analysts have a consensus price target of €680.439 for argenx based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €821.0, and the most bearish reporting a price target of just €540.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $6.0 billion, earnings will come to $2.1 billion, and it would be trading on a PE ratio of 28.0x, assuming you use a discount rate of 5.2%.
• Given the current share price of €568.0, the analyst price target of €680.44 is 16.5% 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.