Agreements In Europe And Japan Will Unlock Global Markets

Key Takeaways

• Strategic agreements in Europe and potential licensing in Japan will unlock major markets, enhancing future earnings and revenue growth.
  
• Cost management alongside sales expansion in core European markets aims to achieve cash flow positivity, positively impacting net margins by 2026.
  
• High operational expenses, ambitious sales targets, and market access challenges raise profitability and liquidity concerns, hinging on successful partnerships and strategic financial plans.

Catalysts

A biotech company, engages in the research, development, and commercialization of targeted therapies for difficult-to-treat hematological diseases in the United States, Europe, and internationally.

• Oncopeptides has reached agreements for pricing and reimbursement with key markets in Europe, including Italy, which will contribute to sales growth as regional access is unlocked in the first half of 2025. This will likely enhance revenue.
  
• The company is advancing negotiations with a partner for a licensing deal in Japan, a market with significant potential and financial impact. This could provide substantial future earnings.
  
• Oncopeptides aims to become cash flow positive by 2026, leveraging increased sales in core European markets (Germany, Spain, Italy, Austria) while maintaining a reduced cost base. This will impact net margins positively.
  
• The exploratory discussions with the FDA regarding the pipeline molecule OPD5 show potential for growth in the U.S. market, which could result in incremental sales and earnings in the long term.
  
• Positive developments outside Europe, such as a partnership with SCBIO in South Korea, indicate diversification and potential sales growth in international markets, enhancing overall revenue.

Oncopeptides Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Oncopeptides's revenue will grow by 120.0% annually over the next 3 years.
• Analysts are not forecasting that Oncopeptides will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Oncopeptides's profit margin will increase from -899.3% to the average GB Biotechs industry of 16.6% in 3 years.
• If Oncopeptides's profit margin were to converge on the industry average, you could expect earnings to reach SEK 55.9 million (and earnings per share of SEK 0.2) by about April 2028, up from SEK -284.6 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 14.2x on those 2028 earnings, up from -1.5x today. This future PE is lower than the current PE for the GB Biotechs industry at 29.0x.
• Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 4.76%, as per the Simply Wall St company report.

Oncopeptides Future Earnings Per Share Growth

Risks

• The company is experiencing significant operational expenses, having invested heavily in building a commercial organization across Europe, which could pressure net margins and delay profitability.
  
• Current sales levels are not sufficient, and while there is growth, profitability by 2026 depends on ambitious sales achievements in key markets like Spain, Germany, and Italy, posing revenue risks if targets are not met.
  
• Oncopeptides' plans hinge on successful conclusion of additional business development partnerships, such as the one in Japan, adding uncertainty to projected earnings if these partnerships do not materialize as planned.
  
• The decision from the French regulatory body advising against reimbursement highlights market access challenges in Europe, which could impede revenue from key markets and delay profitability goals.
  
• The company's financial strategy is partially reliant on backup plans, such as the EIB loan, indicating potential cash flow issues that could impact liquidity and stability if sales and partnerships do not proceed as intended.

Valuation

• The analysts have a consensus price target of SEK2.5 for Oncopeptides 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 SEK3.8, and the most bearish reporting a price target of just SEK1.7.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be SEK337.1 million, earnings will come to SEK55.9 million, and it would be trading on a PE ratio of 14.2x, assuming you use a discount rate of 4.8%.
• Given the current share price of SEK1.95, the analyst price target of SEK2.5 is 22.2% 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.