Expanding Facilities In Belgium And New Jersey Will Boost Reach

Key Takeaways

• Expanded manufacturing and outpatient approval are set to increase supply and streamline distribution, potentially boosting net margins and revenue.
  
• Strategic international market expansion and pipeline diversification aim to enhance market share and future revenue.
  
• Dependence on non-IFRS metrics and rising expenses raise concerns over financial clarity and profitability despite potential growth challenges in a competitive market.

Catalysts

Through its subsidiaries, operates as a biopharmaceutical company that discovers, develops, manufactures, and commercializes novel cell therapies for oncology and other indications in the United States, China, and Europe.

• The expansion of CARVYKTI's manufacturing facilities in Belgium and New Jersey is aimed at doubling supply by 2025, which is likely to increase revenue as it meets growing demand.
  
• Recent approvals for outpatient administration and expanded use in community settings suggest higher volumes and efficiency, potentially improving net margins as distribution becomes more streamlined.
  
• The strategic launch of CARVYKTI in new international markets (e.g., Spain, Germany, Austria, Switzerland, Brazil) indicates a plan for revenue growth through market expansion.
  
• The company's focus on increasing CARVYKTI's use in second-line treatments and the lower occurrence of CRS facilitate broader adoption, possibly enhancing earnings through market share gains.
  
• Ongoing clinical trials to expand CARVYKTI into new lines (CARTITUDE-5 and CARTITUDE-6) and investing in a new Philadelphia research facility signal pipeline diversification, likely impacting future revenue positively.

Legend Biotech Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Legend Biotech's revenue will grow by 48.4% annually over the next 3 years.
• Analysts assume that profit margins will increase from -28.2% today to 22.8% in 3 years time.
• Analysts expect earnings to reach $466.3 million (and earnings per share of $1.07) by about May 2028, up from $-177.0 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $995.0 million in earnings, and the most bearish expecting $141.5 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 37.8x on those 2028 earnings, up from -36.3x today. This future PE is greater than the current PE for the US Biotechs industry at 20.7x.
• Analysts expect the number of shares outstanding to grow by 0.75% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.5%, as per the Simply Wall St company report.

Legend Biotech Future Earnings Per Share Growth

Risks

• The company's reliance on non-IFRS metrics, such as adjusted net loss, may obscure true financial performance, potentially impacting investor confidence and affecting perceived earnings stability.
  
• Unrealized foreign exchange gains and losses significantly influence net profit, introducing volatility that could impact net margins and earnings consistency.
  
• While expansion is underway, current manufacturing capacity constraints, especially in Europe, could impede revenue growth if demand continues to outpace supply.
  
• Competition from new entrants in the CAR-T multiple myeloma market may challenge Legend Biotech's market share, potentially reducing revenue growth prospects.
  
• The significant increase in selling, distribution, and administrative expenses may strain net margins and reduce overall profitability as the company scales operations.

Valuation

• The analysts have a consensus price target of $77.991 for Legend 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 $95.0, and the most bearish reporting a price target of just $53.12.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $2.0 billion, earnings will come to $466.3 million, and it would be trading on a PE ratio of 37.8x, assuming you use a discount rate of 6.5%.
  
• Given the current share price of $34.95, the analyst price target of $77.99 is 55.2% 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.