Expansion Into AYA Segment And International Partnerships Will Drive PEDMARK's Growth In 2025

Key Takeaways

• Expansion into the adolescent and young adult market for PEDMARK is expected to drive significant revenue growth post-2025 with favorable reimbursement trends.
  
• Strategic partnerships in Europe and potential access changes through medical compendia could enhance revenue and earnings growth significantly by mid-2025.
  
• Increased costs and competition in pediatric and AYA segments, along with uncertain international expansion, pose risks to Fennec Pharmaceuticals' revenue and earnings growth.

Catalysts

Operates as a biopharmaceutical company in the United States.

• Fennec Pharmaceuticals is focusing on expanding the market for PEDMARK, especially in the adolescent and young adult (AYA) segment, which is larger than the pediatric market; this is expected to drive revenue growth in 2025 and beyond.
  
• The company is building key partnerships and advocacy with major academic and community centers across the U.S. for greater PEDMARK penetration, which should enhance future revenue and possibly increase net margins due to favorable reimbursement.
  
• Recent launches in the U.K. and Germany through the Norgine partnership, along with expected pricing approvals and milestone revenues in Europe, are anticipated to contribute to revenue growth and earnings expansion in 2025.
  
• Fennec is actively pursuing inclusion of PEDMARK in the National Comprehensive Cancer Network (NCCN) compendium and other medical compendia, which could significantly improve access and reimbursement pathways, impacting revenue positively in mid-2025.
  
• The progress of the STS-J01 trial in Japan and potential future partnerships or licensing deals in the region are catalysts that could open new revenue streams and increase earnings.

Fennec Pharmaceuticals Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Fennec Pharmaceuticals's revenue will grow by 31.3% annually over the next 3 years.
• Analysts assume that profit margins will increase from -0.1% today to 46.4% in 3 years time.
• Analysts expect earnings to reach $50.0 million (and earnings per share of $1.8) by about March 2028, up from $-70.0 thousand today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $79.2 million in earnings, and the most bearish expecting $26.1 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 8.2x on those 2028 earnings, up from -2561.5x today. This future PE is lower than the current PE for the US Biotechs industry at 19.6x.
• Analysts expect the number of shares outstanding to decline by 0.11% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.42%, as per the Simply Wall St company report.

Fennec Pharmaceuticals Future Earnings Per Share Growth

Risks

• The existence of a compounded STS product as a competitor in the pediatric space may limit PEDMARK’s revenue growth potential by making it difficult to capture the full market in academic settings.
  
• There is uncertainty surrounding the expansion of PEDMARK in the AYA segment since many physicians remain unaware of the treatment, potentially impacting future revenue growth expectations if awareness does not increase sufficiently.
  
• Achieving sales growth in the second half of 2025 relies heavily on ongoing marketing and awareness strategies, necessitating significant operating expense increases, which could affect net margins if top-line growth does not meet expectations.
  
• The company’s future revenue from Europe is partly contingent on pricing approvals and the establishment of relationships with key centers in countries like Germany and the U.K., introducing revenue risk if these efforts face delays or challenges.
  
• Potential expansion into markets like Japan is uncertain and reliant on pending clinical trial results and successful partnerships, which could affect long-term earnings growth if the outcomes or partnerships are not favorable.

Valuation

• The analysts have a consensus price target of $12.6 for Fennec Pharmaceuticals 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 $15.0, and the most bearish reporting a price target of just $10.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $107.6 million, earnings will come to $50.0 million, and it would be trading on a PE ratio of 8.2x, assuming you use a discount rate of 6.4%.
• Given the current share price of $6.57, the analyst price target of $12.6 is 47.9% 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.