Endometriosis And Hair Loss Therapies Will Unlock Long-Term Value Through AI-Driven Biologic Development

Catalysts

About Absci

Absci uses an AI driven platform to design and develop novel biologic drugs, advancing its own pipeline and partnered programs.

What are the underlying business or industry changes driving this perspective?

• Advancement of ABS-201 toward two proof of concept readouts in androgenetic alopecia and endometriosis over the next 24 months positions Absci to convert large underpenetrated markets into meaningful revenue growth and improved earnings power.
• Growing demand for nonhormonal, disease modifying therapies in endometriosis aligns with ABS-201's differentiated mechanism, creating potential for premium pricing and structurally higher net margins as the program advances through Phase II data.
• Shifting patient and physician preference toward durable, convenient treatments for hair loss supports ABS-201's limited dose regimen, which could drive high adoption, strong recurring revenue and attractive long term cash flow once commercialized.
• Increased biopharma reliance on external AI drug creation platforms strengthens Absci's partnering prospects for its AI technology, ABS-101, ABS-301 and ABS-501, adding potential nondilutive collaboration and milestone inflows that extend cash runway and reduce financing risk.
• Disciplined capital allocation away from ABS-101 and into ABS-201, combined with a cash runway into the first half of 2028, allows Absci to progress multiple high value shots on goal. This improves the risk reward profile of future earnings relative to the current valuation.

Assumptions

How have these above catalysts been quantified?

• Analysts are assuming Absci's revenue will grow by 175.3% annually over the next 3 years.
• Analysts are not forecasting that Absci will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Absci's profit margin will increase from -4071.2% to the average US Biotechs industry of 16.0% in 3 years.
• If Absci's profit margin were to converge on the industry average, you could expect earnings to reach $9.4 million (and earnings per share of $0.05) by about December 2028, up from $-114.6 million today.
• In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 194.7x on those 2028 earnings, up from -4.3x today. This future PE is greater than the current PE for the US Biotechs industry at 19.6x.
• 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 7.04%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• ABS-201 is still pre proof-of-concept in both androgenetic alopecia and endometriosis, so any disappointing efficacy or safety signals in the 2026 and 2027 readouts could undermine confidence in the prolactin receptor mechanism and materially limit future revenue growth.
• The company is concentrating capital and scientific resources around a single biologic, ABS-201, in two indications. This increases exposure to execution setbacks such as trial delays, recruitment challenges or study design missteps that could push out timelines, raise R&D costs and defer earnings inflection.
• AI enabled biologics platforms are becoming more crowded, and if Absci is unable to secure the anticipated large pharma partnerships or attractive deals for ABS-101, ABS-301 and ABS-501, the company could face weaker collaboration income, a shorter cash runway and greater pressure on net margins.
• Endometriosis and hair loss each represent multibillion dollar markets, but evolving competition from existing standards of care, new GnRH modulators, other nonhormonal agents and rival prolactin receptor antibodies could compress pricing power and limit the long term expansion of operating margins.
• Absci is currently generating minimal revenue relative to its R&D and SG&A expense base, and if secular cost inflation in clinical development and commercial build out outpaces the company’s ability to scale product and partnership revenues, sustained operating losses could weigh on future earnings and valuation.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The analysts have a consensus price target of $8.11 for Absci 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 $10.0, and the most bearish reporting a price target of just $5.8.
  
• In order for you to agree with the analysts, you'd need to believe that by 2028, revenues will be $58.7 million, earnings will come to $9.4 million, and it would be trading on a PE ratio of 194.7x, assuming you use a discount rate of 7.0%.
  
• Given the current share price of $3.29, the analyst price target of $8.11 is 59.5% 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.