Expected Launches Of Stelara And Keytruda Biosimilars Will Strengthen Future Pipeline

Key Takeaways

• The launch of biosimilars and strategic focus on high-growth areas indicate strong future revenue and earnings potential for Formycon.
  
• International expansion and commercial partnerships are expected to significantly boost Formycon's revenue by enhancing market share and distribution.
  
• Legal disputes, high R&D costs, and reliance on partners could pressure revenue growth and earnings stability amid competitive and market challenges.

Catalysts

A biotechnology company, develops biosimilar drugs in Germany and Switzerland.

• The expected U.S. launch of the Stelara biosimilar (FYB202) in February 2025 represents a significant near-term revenue opportunity, bolstered by the recent FDA and European Commission approvals, which should positively impact Formycon's revenue growth.
  
• Formycon’s advancing pipeline, with multiple products, including their oncology program with the Keytruda biosimilar (FYB206) in pivotal Phase I and Phase III trials, indicates a diversified and strong future growth potential that could enhance earnings through the addition of new revenue streams.
  
• The addition of new products to the pipeline, such as FYB210 in the immunology space, aligns with Formycon's strategic focus on high-growth therapeutic areas, potentially increasing future revenue as these products reach commercialization.
  
• Sizable market share gains and ongoing international expansion of FYB201 (Lucentis biosimilar) signal improved revenue opportunities, especially as new markets are entered and adoption increases through new dosage forms expected to launch next year.
  
• Potential commercial partnerships for the Eylea biosimilar (FYB203) are anticipated soon, which, combined with the recent EMA approval advancements, would enhance Formycon's financial profile by driving revenue expansion as distribution widens.

Formycon Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Formycon's revenue will grow by 49.1% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 105.1% today to 50.7% in 3 years time.
• Analysts expect earnings to reach €102.2 million (and earnings per share of €5.38) by about January 2028, up from €63.9 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting €178 million in earnings, and the most bearish expecting €47.6 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 17.6x on those 2028 earnings, up from 15.5x today. This future PE is greater than the current PE for the DE Biotechs industry at 17.3x.
• Analysts expect the number of shares outstanding to grow by 2.47% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 4.54%, as per the Simply Wall St company report.

Formycon Future Earnings Per Share Growth

Risks

• The company's revenue has decreased compared to 2023 due to lower reimbursement for development work and the absence of prior upfront milestone payments, which could impact future revenue growth and stability.
  
• There is a significant risk related to ongoing legal disputes, such as with Regeneron over Eylea biosimilars, which may result in financial liabilities or hinder timely market entry, potentially affecting revenue growth projections.
  
• High R&D expenditures and increasing operational expenses, including investments in IT, compliance, and upcoming ESG requirements, may pressure net margins if not offset by proportional revenue growth.
  
• Dependence on securing commercial partners and potential delays in launching products like the FYB206 and FYB203 biosimilars could impact earnings and further revenue generation.
  
• Volatility in royalties and profit-sharing revenue streams from products like FYB201, due to market dynamics and competitive pressures, may create uncertainty in earnings stability and financial forecasting.

Valuation

• The analysts have a consensus price target of €87.22 for Formycon 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 €102.0, and the most bearish reporting a price target of just €63.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €201.4 million, earnings will come to €102.2 million, and it would be trading on a PE ratio of 17.6x, assuming you use a discount rate of 4.5%.
  
• Given the current share price of €56.0, the analyst's price target of €87.22 is 35.8% 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.