Antibiotic Resistance And Payer Access Challenges Will Eventually Support A Cautious Long-Term Recovery

Catalysts

About Iterum Therapeutics

Iterum Therapeutics is a commercial stage pharmaceutical company focused on marketing ORLYNVAH, an oral antibiotic for uncomplicated urinary tract infections in the United States.

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

• Although the growing need for effective oral options to manage resistant urinary tract infections supports long term demand, Iterum must overcome entrenched prescribing habits in a category that has seen little innovation. This could delay meaningful prescription growth and pressure revenue against its $5 million to $15 million 2026 target.
• While iterative progress in payer discussions and the first Medicare Part D rebate agreement create a pathway to broader formulary coverage, slow and uncertain inclusion timelines at major pharmacy benefit managers may keep out of pocket costs high and constrain volume driven operating leverage and net margins.
• Although the shift toward outpatient management and avoidance of hospital based care favors oral therapies like ORLYNVAH, Iterum’s modest and partly virtual commercial footprint risks underpenetrating high value geographies. This may limit the scale needed to move from current quarterly sales of $0.4 million to earnings supporting self funding operations.
• While an expanding global patent estate into the late 2030s and early 2040s secures exclusivity for sulopenem based products, the company’s dependence on a single asset and potential entry of newer competing antibiotics could cap long run pricing power and compress gross margins as payers demand steeper rebates.
• Although the rising burden of antimicrobial resistance and interest from infectious disease specialists point to broader clinical utility over time, Iterum’s short cash runway into the second quarter of 2026 and need for additional equity financing introduce dilution risk and may constrain the commercial investments required to translate that demand into sustained revenue and future earnings growth.

Assumptions

This narrative explores a more pessimistic perspective on Iterum Therapeutics compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts. How have these above catalysts been quantified?

• The bearish analysts are assuming Iterum Therapeutics's revenue will grow by 350.5% annually over the next 3 years.
• The bearish analysts are not forecasting that Iterum Therapeutics will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Iterum Therapeutics's profit margin will increase from -6913.1% to the average US Pharmaceuticals industry of 20.9% in 3 years.
• If Iterum Therapeutics's profit margin were to converge on the industry average, you could expect earnings to reach $7.4 million (and earnings per share of $0.12) by about December 2028, up from $-27.0 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $40.7 million in earnings, and the most bearish expecting $-31.7 million.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 21.7x on those 2028 earnings, up from -0.9x today. This future PE is greater than the current PE for the US Pharmaceuticals industry at 19.7x.
• The bearish 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 7.77%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• The company remains a single product story in a competitive antibiotic market where prescribing habits have been entrenched for decades. If physician behavior proves slower to change than management expects, ORLYNVAH prescription growth may plateau and keep net product revenue well below the projected range for 2026 and beyond, limiting long term earnings potential.
• Payer access is still nascent, with only 16 percent of insured lives currently covered and key Medicare Part D and commercial formulary decisions not effective until 2026 or 2027. Delays or less favorable coverage and rebate terms could keep patient out of pocket costs high, suppress volume growth and prevent operating leverage from improving net margins.
• Operating expenses are projected at between 25 million and 30 million dollars in 2026 against a revenue goal of only 5 million to 15 million dollars and current quarterly losses of about 9 million dollars. If commercial efficiency gains from smaller field and virtual teams do not materialize, sustained high spending could keep earnings deeply negative for longer than anticipated.
• With only 11 million dollars of cash and an expected runway into the second quarter of 2026, the business is dependent on raising additional capital. If financing conditions tighten or investor appetite weakens, Iterum may need to issue a large number of new shares at depressed prices or cut growth investments, which would both dilute existing shareholders and constrain future revenue and earnings growth.

Valuation

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

• The assumed bearish price target for Iterum Therapeutics is $2.0, which represents up to two standard deviations below the consensus price target of $5.5. This valuation is based on what can be assumed as the expectations of Iterum Therapeutics's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $9.0, and the most bearish reporting a price target of just $2.0.
  
• In order for you to agree with the more bearish analyst cohort, you'd need to believe that by 2028, revenues will be $35.7 million, earnings will come to $7.4 million, and it would be trading on a PE ratio of 21.7x, assuming you use a discount rate of 7.8%.
  
• Given the current share price of $0.46, the analyst price target of $2.0 is 77.0% 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.