Allergy+ Strategy And Neffy Nasal Spray Will Ignite Revenue Growth And Boost Earnings

Key Takeaways

• The Allergy+ strategy and neffy nasal spray deal are expected to create new revenue streams and drive growth from 2025 onward.
  
• Continuous international growth in tablet sales and cost-saving measures indicate sustained revenue growth and improved operational efficiency.
  
• Short-term revenue growth may be impacted by challenges in North America and China, including integration issues, regulatory delays, and fluctuating shipment expectations.

Catalysts

Operates as an allergy solutions company in Europe, North America, and internationally.

• The Allergy+ strategy implementation and recent licensing deal with ARS Pharma for the neffy nasal spray are expected to create new revenue streams and catalyze growth from 2025 onward, positively impacting revenue.
  
• Successful completion of patient recruitment and ongoing clinical trials for the peanut allergy tablet, along with regulatory processes for children's tablets in Europe and North America, indicate expected future product launches that are likely to boost revenue and earnings.
  
• Continuous double-digit growth in Europe and international tablet sales, particularly in Japan and Southeast Asia, reflects a strong inflow of new patients and is anticipated to sustain revenue growth.
  
• Strategic optimization and cost-saving measures led to a significant increase in EBIT margin, from 14% to 22%, suggesting potential for further improvement in net margins and operational efficiency.
  
• The potential long-term financial impact of the neffy nasal spray, targeting a peak sales potential of up to DKK 3 billion, signifies a substantial opportunity for revenue and earnings growth as part of ALK's diversification and expansion strategy.

ALK-Abelló Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming ALK-Abelló's revenue will grow by 11.1% annually over the next 3 years.
• Analysts assume that profit margins will increase from 14.6% today to 19.1% in 3 years time.
• Analysts expect earnings to reach DKK 1.4 billion (and earnings per share of DKK 6.59) by about December 2027, up from DKK 785.0 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 31.3x on those 2027 earnings, down from 43.6x today. This future PE is greater than the current PE for the GB Pharmaceuticals industry at 19.3x.
• Analysts expect the number of shares outstanding to decline by 1.01% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 4.46%, as per the Simply Wall St company report.

ALK-Abelló Future Earnings Per Share Growth

Risks

• The soft growth in North America, including only a 3% increase in total sales, could hinder ALK-Abelló's overall revenue growth prospects.
  
• The issues faced in integrating and meeting sales expectations for PRE-PEN in North America point to potential challenges in achieving anticipated revenue and earnings targets in the region.
  
• The plan to incur additional one-off costs due to revisions of plans and activities in China might temporarily affect net margins and free cash flow negatively.
  
• The delay in regulatory approval for the house dust mite tablet in China and its adjusted launch timeline may impair potential revenue streams from the Chinese market in the short term.
  
• The fluctuation in Q4 revenue expectations, particularly with no SCIT shipments planned for China and lower tablet shipments for Japan, could impact short-term revenue growth projections.

Valuation

• The analysts have a consensus price target of DKK 181.2 for ALK-Abelló 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 DKK 215.0, and the most bearish reporting a price target of just DKK 153.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2027, revenues will be DKK 7.4 billion, earnings will come to DKK 1.4 billion, and it would be trading on a PE ratio of 31.3x, assuming you use a discount rate of 4.5%.
  
• Given the current share price of DKK 154.9, the analyst's price target of DKK 181.2 is 14.5% 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.