Anticipated Launches Of YORVIPATH And SKYTROFA Will Expand Treatment Options In Endocrinology

Key Takeaways

• Expansion in hypoparathyroidism treatment and growth hormone products drives substantial revenue growth, leveraging a robust commercialization strategy.
  
• Strategic collaborations and financial strength support ambitious plans, including global product launches and new treatment approvals, fostering long-term growth.
  
• Success hinges on product commercialization, facing competition, regulatory hurdles, and financial volatility, while collaborations offer potential but introduce dependency risks.

Catalysts

A biopharmaceutical company, focuses on developing therapies for unmet medical needs.

• Ascendis Pharma expects significant revenue growth from the anticipated launch of YORVIPATH in the U.S. for hypoparathyroidism, targeting a large market of 70,000 to 90,000 adults. They are also expanding their commercialization infrastructure to support this, which is expected to increase revenue substantially.
  
• SKYTROFA, a once-weekly growth hormone, is projected to become a blockbuster product, driven by label expansions for new indications such as adult growth hormone deficiency, Turner syndrome, and more. Ascendis is positioned to capture the 85% of prescriptions still written for daily growth hormone, potentially driving significant revenue growth.
  
• TransCon CNP for the treatment of achondroplasia is expected to submit for U.S. and EU approval in 2025, with pivotal trial results demonstrating promising growth and comorbidity improvement. If approved, it could open up a significant new revenue stream, given the market potential in treating growth disorders.
  
• The collaboration with Novo Nordisk to develop a once-monthly GLP-1 product for obesity and type 2 diabetes is expected to bring in an upfront payment, royalties, and milestone payments. This partnership validates Ascendis' TransCon technology and has the potential to impact earnings positively as the program advances.
  
• Financially, Ascendis has strengthened its balance sheet with significant capital, positioning it well to execute its strategic priorities, including global launches and label expansions. This financial stability supports long-term growth and aims to achieve cash flow breakeven by the end of 2025, influencing future earnings positively.

Ascendis Pharma Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Ascendis Pharma's revenue will grow by 62.9% annually over the next 3 years.
• Analysts assume that profit margins will increase from -130.3% today to 32.3% in 3 years time.
• Analysts expect earnings to reach €457.0 million (and earnings per share of €7.4) by about December 2027, up from €-426.5 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting €848 million in earnings, and the most bearish expecting €-183.1 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 30.8x on those 2027 earnings, up from -17.9x today. This future PE is greater than the current PE for the US Biotechs industry at 17.5x.
• Analysts expect the number of shares outstanding to grow by 1.08% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.36%, as per the Simply Wall St company report.

Ascendis Pharma Future Earnings Per Share Growth

Risks

• Ascendis Pharma relies heavily on the successful commercialization of its product pipeline, including SKYTROFA and YORVIPATH, which could face challenges due to competition and market saturation, potentially impacting revenues and market share.
  
• The company's investigational products have not yet been approved for commercial use, and there is a risk associated with gaining regulatory approvals and achieving anticipated clinical trial outcomes, which could delay revenue generation.
  
• The launch and market acceptance of YORVIPATH are critical, with factors such as reimbursement processes and competition from existing treatment options possibly affecting initial uptake and revenue projections.
  
• Adjustments related to prior period sales deductions have negatively impacted SKYTROFA's reported revenue, suggesting financial volatility that could continue to affect net margins.
  
• While collaborations, such as with Novo Nordisk, provide potential upside, reliance on partners for commercialization may introduce risk regarding milestone achievement and royalty revenues, impacting future earnings expectations.

Valuation

• The analysts have a consensus price target of €191.58 for Ascendis Pharma 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 €288.39, and the most bearish reporting a price target of just €152.68.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2027, revenues will be €1.4 billion, earnings will come to €457.0 million, and it would be trading on a PE ratio of 30.8x, assuming you use a discount rate of 6.4%.
• Given the current share price of €134.28, the analyst's price target of €191.58 is 29.9% 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.