Chikungunya Vaccine Launch And Market Expansion Will Open Opportunities But Mpox Demand Uncertainties Could Pose Risks

Key Takeaways

• The chikungunya vaccine launch and expansion into new markets could significantly drive revenue and broaden customer base.
  
• Strategic manufacturing enhancements and growth in the Travel Health portfolio can improve supply chain resilience and net margins.
  
• Uncertainty in vaccine demand, market recovery, and political factors could influence manufacturing, revenue growth, and profitability, affecting financial outcomes and growth prospects.

Catalysts

Develops, manufactures, and commercializes life-saving vaccines.

• Bavarian Nordic is gearing up to launch a new vaccine for chikungunya which is expected to receive regulatory approval in 2025 from both the FDA and EMA. This launch is anticipated to contribute to revenue growth.
  
• The company has secured strong orders for its mpox vaccine, with DKK 2.4 billion in revenue expected from Public Preparedness in 2025, which can indicate robust future earnings.
  
• Significant expansion in Bavarian Nordic's Travel Health portfolio, with unexpected growth in rabies and TBE (tick-borne encephalitis) markets, could lead to increased revenues and improved net margins due to the completion of tech transfer for rabies.
  
• Bavarian Nordic's efforts in expanding its commercial presence in new markets such as the U.K., Canada, and France in preparation for the chikungunya vaccine launch can help drive revenue and broaden customer base significantly in the coming years.
  
• Strategic manufacturing enhancements, including potential tech transfer to Africa for mpox vaccine fill-finish, will support greater supply chain resilience and could positively impact future gross and net margins.

Bavarian Nordic Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Bavarian Nordic's revenue will decrease by 2.4% annually over the next 3 years.
• Analysts assume that profit margins will increase from 18.4% today to 18.5% in 3 years time.
• Analysts expect earnings to reach DKK 1.0 billion (and earnings per share of DKK 12.53) by about February 2028, down from DKK 1.1 billion today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as DKK801.3 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 26.4x on those 2028 earnings, up from 12.2x today. This future PE is greater than the current PE for the GB Biotechs industry at 15.5x.
• Analysts expect the number of shares outstanding to grow by 0.49% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 5.04%, as per the Simply Wall St company report.

Bavarian Nordic Future Earnings Per Share Growth

Risks

• Uncertainty regarding demand forecasts for the mpox vaccine could lead to hesitance in investing in expanded manufacturing capabilities, impacting future revenue growth.
  
• The declining recovery in the market for Vivotif, coupled with past overestimation of demand, poses a risk to expected revenues from the Travel Health segment.
  
• The need for execution on upcoming logistics for vaccine distribution, especially to Africa, poses a risk to realizing the higher end of revenue guidance, impacting financial outcomes for the year.
  
• Cash outlays for manufacturing tech transfers and potential expansion into new markets may not be justified if future vaccine demand does not meet expectations, affecting net margins and profitability.
  
• Concerns over political factors impacting vaccine policies could create market uncertainties, potentially impacting future earnings and growth prospects in the U.S. market.

Valuation

• The analysts have a consensus price target of DKK305.0 for Bavarian Nordic 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 DKK360.0, and the most bearish reporting a price target of just DKK245.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be DKK5.6 billion, earnings will come to DKK1.0 billion, and it would be trading on a PE ratio of 26.4x, assuming you use a discount rate of 5.0%.
  
• Given the current share price of DKK175.4, the analyst price target of DKK305.0 is 42.5% higher. Despite analysts expecting the underlying buisness to decline, they seem to believe it's more valuable than what the market thinks.
  
• 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.