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ALK-Abelló

Allergy+ Strategy Will Reach Millions With New Therapies

AN
Consensus Narrative from 4 Analysts
Published
11 Dec 24
Updated
26 Mar 25
Share
AnalystConsensusTarget's Fair Value
DKK 181.25
22.2% undervalued intrinsic discount
26 Mar
DKK 141.00
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1Y
15.2%
7D
0.7%

Author's Valuation

DKK 181.3

22.2% undervalued intrinsic discount

Analyst Price Target Fair Value

Key Takeaways

  • Expanding into new patient groups and segments will drive long-term revenue growth in respiratory allergies and broader allergy space.
  • Focus on optimizing operations and increasing production capacity can enhance margins and earnings, supported by strategic initiatives in key markets.
  • Challenges in revenue growth and dependency on European markets, alongside regulatory issues, threaten ALK-Abelló's future revenue and market expansion potential.

Catalysts

About ALK-Abelló
    Operates as an allergy solutions company in Europe, North America, and internationally.
What are the underlying business or industry changes driving this perspective?
  • ALK-Abelló is expanding its addressable market in respiratory allergy by adding new patient groups, particularly children, and expanding into new segments. This is expected to drive future revenue growth.
  • The company is building new revenue streams in the broader allergy space, including the in-licensing of the nasal spray neffy for anaphylaxis, which could positively impact future revenue and margins.
  • ALK-Abelló is optimizing its business platform to focus on high potential growth levers, reducing complexity, and generating cost savings. This is expected to enhance net margins and earnings in the future.
  • The company is executing the Allergy+ strategy, targeting 5 million patients by 2030 and focusing on pipeline development in both existing and new therapy areas, which is anticipated to contribute to long-term revenue growth.
  • ALK-Abelló is investing in increasing production capacity to support future growth, with strategic initiatives in markets like Japan, India, and China, which are likely to impact revenue and earnings positively over the coming years.

ALK-Abelló Earnings and Revenue Growth

ALK-Abelló Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?
  • Analysts are assuming ALK-Abelló's revenue will grow by 12.7% annually over the next 3 years.
  • Analysts assume that profit margins will increase from 14.7% today to 19.8% in 3 years time.
  • Analysts expect earnings to reach DKK 1.6 billion (and earnings per share of DKK 7.07) by about March 2028, up from DKK 815.0 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 29.4x on those 2028 earnings, down from 37.5x today. This future PE is greater than the current PE for the GB Pharmaceuticals industry at 22.5x.
  • Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
  • To value all of this in today's terms, we will use a discount rate of 4.74%, as per the Simply Wall St company report.

ALK-Abelló Future Earnings Per Share Growth

ALK-Abelló Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?
  • Revenue growth challenges in North America and international markets were noted, with flat revenue in North America and only a 4% increase in international markets, which could impact overall revenue growth targets.
  • The recent one-off investment costs, including those related to strategic initiatives and optimization programs, have affected operating margins, as seen with a Q4 operating margin of only 14%, potentially impacting future earnings if similar costs recur.
  • Neffy, a newly licensed product, is projected to have modest contributions in the second half of the year, with uncertainties regarding pricing potentially impacting revenue projections.
  • Dependence on European markets for growth, particularly from tablet sales, suggests a vulnerability should that market's conditions change, which could affect future revenue sustainability.
  • Delays and regulatory challenges, such as those seen in China with import license renewals, could hinder expected market expansions and revenue growth from those regions.

Valuation

How have all the factors above been brought together to estimate a fair value?
  • The analysts have a consensus price target of DKK181.25 for ALK-Abelló based on their expectations of its future earnings growth, profit margins and other risk factors.
  • In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be DKK7.9 billion, earnings will come to DKK1.6 billion, and it would be trading on a PE ratio of 29.4x, assuming you use a discount rate of 4.7%.
  • Given the current share price of DKK138.1, the analyst price target of DKK181.25 is 23.8% 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.

How well do narratives help inform your perspective?

Disclaimer

Warren A.I. is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by Warren A.I. are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that Warren A.I.'s analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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