EPKINLY's Global Approvals And Profound Bio Acquisition Will Strengthen Future Oncology Pipeline

Key Takeaways

• Genmab's focus on late-stage therapies, particularly EPKINLY, is expected to boost future revenue and growth due to best-in-class technology and market approvals.
  
• Acquisition of Profound Bio aims to expand innovative product offerings, enhancing long-term growth and revenue opportunities through advanced platforms.
  
• High operating expenses and regulatory uncertainties may pressure net margins and impact revenue stability if R&D investments do not lead to successful market entries.

Catalysts

Develops antibody therapeutics for the treatment of cancer and other diseases primarily in Denmark.

• Genmab is prioritizing its late-stage development programs, especially EPKINLY, Rina-S, and acasunlimab, which are seen as potential best-in-class therapies. This strategic focus is expected to significantly enhance Genmab's future revenue and growth potential.
  
• EPKINLY, utilizing Genmab's DuoBody technology, has achieved approvals in key markets like Japan, the EU, and the U.S., for difficult-to-treat lymphomas, potentially leading to increased global revenues and market share due to its best-in-class profile.
  
• Strong commercial traction and strategic execution in key markets for EPKINLY and Tivdak is poised to drive continued revenue growth, as these products already contribute to 35% of total revenue growth, showcasing effective commercial execution and market penetration.
  
• The advancement of Genmab's own medicines, powered by continued investment in commercialization capabilities, is expected to fuel future growth, thus bolstering earnings and potentially increasing net profit margins by leveraging efficiencies and economies of scale.
  
• The acquisition of Profound Bio is anticipated to enhance Genmab's long-term growth potential by integrating next-generation ADC platforms, which are likely to lead to innovative new product offerings, thereby expanding revenue streams and improving financial health.

Genmab Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Genmab's revenue will grow by 17.3% annually over the next 3 years.
• Analysts assume that profit margins will increase from 23.7% today to 32.8% in 3 years time.
• Analysts expect earnings to reach DKK 10.5 billion (and earnings per share of DKK 155.71) by about December 2027, up from DKK 4.7 billion today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting DKK 12.1 billion in earnings, and the most bearish expecting DKK 5.2 billion.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 17.2x on those 2027 earnings, down from 21.6x today. This future PE is lower than the current PE for the GB Biotechs industry at 17.5x.
• Analysts expect the number of shares outstanding to grow by 0.62% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 4.73%, as per the Simply Wall St company report.

Genmab Future Earnings Per Share Growth

Risks

• The reliance on forward-looking statements highlights a risk of potential discrepancies between current expectations and actual performance, which might impact investor confidence and future earnings.
  
• The termination of early-stage programs and halting Phase III development for Tivdak in some cancer types may indicate challenges in drug development, potentially reducing future revenue streams.
  
• The intense prioritization of programs like EPKINLY and limited focus on ongoing trials could affect the company's ability to diversify its pipeline, impacting long-term revenue stability.
  
• The company's high operating expenses, driven by significant R&D investments, might lead to pressure on net margins if promising developments do not translate into successful market entries.
  
• Regulatory and approval uncertainties, exemplified by awaiting decisions and submissions, particularly with partners like J&J, could lead to unpredictable impacts on revenue forecasts and operational plans.

Valuation

• The analysts have a consensus price target of DKK 2345.0 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 DKK 2970.0, and the most bearish reporting a price target of just DKK 1600.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2027, revenues will be DKK 32.0 billion, earnings will come to DKK 10.5 billion, and it would be trading on a PE ratio of 17.2x, assuming you use a discount rate of 4.7%.
• Given the current share price of DKK 1536.0, the analyst's price target of DKK 2345.0 is 34.5% 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.