Late-Stage Investments In EPKINLY, Rina-S, And Acasunlimab Will Expand Market Potential

Key Takeaways

• Strategic investments in late-stage programs and expansions into new markets are poised to drive significant revenue and market reach growth for Genmab.
  
• Focused allocation of R&D funding enhances long-term value, impacting earnings by optimizing resource deployment for maximum return.
  
• Heavy investment concentration in late-stage trials and reliance on DARZALEX revenues pose financial risks amid competitive pressures and costly development projects.

Catalysts

A biotechnology company, develops antibody-based products and product candidates for the treatment of cancer and other diseases in Denmark.

• Genmab is poised for significant revenue growth by the end of the decade due to strategic investments in late-stage programs like EPKINLY, Rina-S, and Acasunlimab, which have the potential to expand market reach with estimated peak sales exceeding $3 billion and $2 billion, respectively. This is likely to impact revenue positively.
  
• The advancement of EPKINLY's clinical development across B-cell malignancies, with multiple Phase III studies fully recruited ahead of schedule, suggests forthcoming pivotal readouts by 2026. Success could lead to significant market expansion, particularly in frontline diffuse large B-cell lymphoma. This is expected to drive revenue growth.
  
• The planned expansion and regulatory approval for Tivdak in new markets like Europe and Japan, along with Genmab taking full commercialization responsibilities outside the U.S. and China, presents opportunities for sales growth in underpenetrated regions, impacting overall revenue growth.
  
• Genmab’s robust recurring revenue growth, driven by investments in commercialization capabilities, particularly in the U.S. and Japan markets for EPKINLY and Tivdak, is set to lead to a 34% contribution to total projected revenue growth in 2025. This affects both revenue and net margins as the commercialization process gains efficiency.
  
• Strategically reallocated R&D investments toward late-stage assets with strong commercial potential, focusing over 55% of total R&D spending in 2025 on EPKINLY, Rina-S, and Acasunlimab, could enhance long-term value creation, impacting earnings growth by ensuring resources are efficiently deployed for maximum return.

Genmab Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Genmab's revenue will grow by 15.2% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 36.4% today to 30.7% in 3 years time.
• Analysts expect earnings to reach DKK 10.1 billion (and earnings per share of DKK 152.8) by about May 2028, up from DKK 7.8 billion today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting DKK12.3 billion in earnings, and the most bearish expecting DKK7.6 billion.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 13.2x on those 2028 earnings, up from 11.0x today. This future PE is greater than the current PE for the GB Biotechs industry at 11.6x.
• Analysts expect the number of shares outstanding to decline by 2.46% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 4.96%, as per the Simply Wall St company report.

Genmab Future Earnings Per Share Growth

Risks

• The potential for delayed or unsuccessful development projects poses a risk to future revenue generation, particularly impacting the revenue growth and market expansion projected by Genmab across its pipeline.
  
• The $1.8 billion acquisition of ProfoundBio and the $500 million share buyback, despite a strong cash position, could strain financial resources, potentially impacting net margins and funding for further innovation.
  
• Competitive pressure in the diffuse large B-cell lymphoma (DLBCL) market, especially with other CD20 bispecifics entering the landscape, challenges EPKINLY's market share, which could affect earnings projections for EPKINLY.
  
• Investments are heavily concentrated in late-stage clinical trials for three key programs, meaning any setbacks in these could adversely affect anticipated revenue streams, ultimately impacting net margins.
  
• The financial guidance is heavily reliant on recurring revenues from DARZALEX, which could be impacted by competitive dynamics or market challenges, thus affecting Genmab's earnings and profitability outlook.

Valuation

• The analysts have a consensus price target of DKK2020.666 for Genmab 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 DKK2750.0, and the most bearish reporting a price target of just DKK1000.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be DKK32.9 billion, earnings will come to DKK10.1 billion, and it would be trading on a PE ratio of 13.2x, assuming you use a discount rate of 5.0%.
• Given the current share price of DKK1390.0, the analyst price target of DKK2020.67 is 31.2% 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.