Anticipated VYJUVEK Launch In EU And Japan Will Expand International Reach

Key Takeaways

• Anticipated international market expansion and product diversification could boost revenue through successful launches and positive clinical progress.
  
• Scaling up manufacturing processes and diversifying pipeline offerings aim to enhance operational efficiency and support long-term growth.
  
• Regulatory and pricing challenges in new markets, coupled with competition and high expenses, could limit revenue growth and market share 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.

• Successful VYJUVEK launch in the EU and Japan is anticipated, expanding revenue potential from international markets and increasing total sales.
  
• Positive clinical progress in the cystic fibrosis (CF) and alpha-1 antitrypsin (A1AT) programs is expected to translate early signs of efficacy into strong results, potentially boosting future revenue and earnings through product diversification.
  
• The planned launch of B-VEC for treating lesions in the eye of DEB patients represents the expansion of their product portfolio, potentially increasing revenue streams and enhancing earnings stability.
  
• The scaling up of manufacturing processes approved by the FDA aims to derisk CMC from other pipeline products, likely impacting production costs positively and supporting both revenue and net margin growth due to increased operational efficiency.
  
• The continued development and potential approval of inhaled therapies for lung diseases such as CF, NSCLC, and AATD indicate a forward-looking strategy to diversify pipeline offerings, impacting long-term revenue growth and market cap expansion.

Krystal Biotech Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Krystal Biotech's revenue will grow by 41.6% annually over the next 3 years.
• Analysts assume that profit margins will increase from 30.7% today to 54.0% in 3 years time.
• Analysts expect earnings to reach $445.0 million (and earnings per share of $14.5) by about March 2028, up from $89.2 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $702.7 million in earnings, and the most bearish expecting $340.6 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 16.8x on those 2028 earnings, down from 60.9x 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 grow by 0.87% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.23%, as per the Simply Wall St company report.

Krystal Biotech Future Earnings Per Share Growth

Risks

• The reliance on forward-looking statements that are based on current expectations introduces uncertainty, which could affect earnings if actual results differ materially from projections.
  
• The need for increased operating expenses, particularly for international expansion, will eat into net margins and could affect earnings if revenue growth doesn't meet expectations.
  
• The potential for reimbursement approvals and patient access to slow down due to logistical challenges, such as the availability of genetic test results, could impact revenue growth if prelaunch penetration targets aren't met.
  
• The company faces regulatory and pricing pressures in new markets like Europe and Japan, which could affect revenue if pricing isn't favorable compared to the U.S.
  
• The presence of competing therapies in DEB could limit market share and affect revenue if VYJUVEK doesn't maintain a strong value proposition.

Valuation

• The analysts have a consensus price target of $214.8 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 $195.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $824.4 million, earnings will come to $445.0 million, and it would be trading on a PE ratio of 16.8x, assuming you use a discount rate of 6.2%.
• Given the current share price of $188.5, the analyst price target of $214.8 is 12.2% 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.