VYJUVEK Expansion And Pipeline Readouts Will Open New Markets

Key Takeaways

• Global expansion of VYJUVEK and promising pipeline developments position Krystal Biotech for significant long-term revenue growth and market share increase.
  
• Financial stability with positive EPS and cash reserves supports strategic investments, enhancing shareholder value and earnings growth potential.
  
• Variability in patient transitions, new market challenges, and emerging competition could destabilize revenue growth and forecast accuracy for Krystal Biotech.

Catalysts

A commercial-stage biotechnology company, discovers, develops, manufactures, and commercializes genetic medicines to treat diseases with high unmet medical needs in the United States.

• Krystal Biotech's global expansion of VYJUVEK, including launches in Europe and expected approval in Japan, are key growth catalysts. The successful launches could significantly boost revenue due to the large number of already identified DEB patients in these regions.
  
• The company's robust pipeline with upcoming clinical readouts for CF, AATD, aesthetics, and ocular lesions in DEB positions Krystal Biotech to drive long-term revenue growth and enhance earnings through potential new product approvals and market introductions.
  
• The establishment of VYJUVEK as a lifelong therapy and its success in achieving durable wound closure for DEB patients support strong long-term utilization rates. This could improve revenue consistency and contribute to stable, ongoing growth in net margins.
  
• Krystal Biotech's focus on expanding its sales force to reach deeper into communities and enhance physician engagement is anticipated to overcome current patient start form slowdowns. This strategic move could accelerate patient adoption rates, driving revenue and aiding market share growth.
  
• The company's financial stability, characterized by positive EPS and sufficient cash reserves, allows for continued strategic investment in the pipeline and international market expansion, which are expected to enhance shareholder value and bolster earnings growth over the next few years.

Krystal Biotech Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Krystal Biotech's revenue will grow by 37.8% annually over the next 3 years.
• Analysts assume that profit margins will increase from 37.2% today to 46.4% in 3 years time.
• Analysts expect earnings to reach $404.7 million (and earnings per share of $14.66) by about May 2028, up from $124.0 million today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as $343.4 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 18.6x on those 2028 earnings, down from 32.5x today. This future PE is greater than the current PE for the US Biotechs industry at 18.3x.
• Analysts expect the number of shares outstanding to grow by 1.19% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.21%, as per the Simply Wall St company report.

Krystal Biotech Future Earnings Per Share Growth

Risks

• The unpredictability and variability in patient pausing patterns as patients transition to maintenance regimens could lead to waviness in revenue in the upcoming quarters, impacting the predictability of earnings.
  
• Increased time and effort required for sales representatives to educate healthcare providers and engage patients as they reach deeper into communities could slow patient acquisition, potentially affecting revenue growth rates.
  
• The requirement for the first dose of VYJUVEK to be administered in a clinical setting in the EU may lead to delays in patient starts, impacting the revenue trajectory in new markets.
  
• The focus on community expansion and the transition to reaching less impacted DDEB patients may present challenges in maintaining high compliance rates, which could affect long-term revenue consistency.
  
• New competition from recently approved treatments, despite different safety and efficacy profiles, could impact market share and revenue growth projections for VYJUVEK.

Valuation

• The analysts have a consensus price target of $216.5 for Krystal Biotech 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 $245.0, and the most bearish reporting a price target of just $193.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $872.4 million, earnings will come to $404.7 million, and it would be trading on a PE ratio of 18.6x, assuming you use a discount rate of 6.2%.
  
• Given the current share price of $139.47, the analyst price target of $216.5 is 35.6% 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.