Patent Expiry And Payer Pressures Will Check Future Performance

Key Takeaways

• Intensifying cost controls and payer scrutiny threaten long-term revenue, especially as rare disease therapy reimbursement becomes increasingly difficult in US and international markets.
  
• Competitive pressures from generics, shifting treatment paradigms, and high regulatory risk will limit market share, profitability, and future revenue growth.
  
• Rapid international expansion, growing diagnosis rates, strong pipeline progress, and disciplined operations position the company for sustained growth, reduced financial risk, and improved profitability.

Catalysts

A biopharmaceutical company, focuses on the development and commercialization of novel therapies for debilitating rare and orphan diseases.

• Intensifying global scrutiny on drug pricing and healthcare expenditures poses a substantial threat to Mirum's long-term revenue growth, as reimbursement for rare disease therapies is increasingly challenged by payers and governments seeking to control costs in both the United States and international markets.
  
• As the company's leading revenue driver, Livmarli, relies on a small population of rare pediatric liver disease patients, declining innovation in small molecule approaches and a broad shift toward gene-based and preventative therapies are likely to cap future revenue expansion and diminish net margins as payers and clinicians prioritize curative or one-time interventions over symptom management.
  
• Rapid erosion of intellectual property protection and looming entry of generics or biosimilars-especially as key patents expire or new competitors pursue similar orphan indications-could compress Livmarli's market share and restrict future earnings potential, undermining the foundation of current valuation assumptions.
  
• Heightened industry consolidation and the growing necessity for costly commercial partnerships will put smaller companies like Mirum at a disadvantage, forcing heavier revenue-sharing, increased operational expenses, or acquisition at lower premiums, ultimately limiting the company's ability to scale earnings and improve long-term profitability.
  
• Increasing regulatory hurdles and tighter standards for new rare disease drug approvals, along with the historically low clinical success rates for rare and pediatric conditions, substantially elevate R&D costs and risk that a significant portion of Mirum's expanding pipeline will fail to reach the market, thereby suppressing future revenue and earnings growth despite currently robust guidance.

Mirum Pharmaceuticals Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on Mirum Pharmaceuticals compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming Mirum Pharmaceuticals's revenue will grow by 18.4% annually over the next 3 years.
• The bearish analysts assume that profit margins will increase from -13.6% today to 3.3% in 3 years time.
• The bearish analysts expect earnings to reach $23.3 million (and earnings per share of $0.46) by about September 2028, up from $-58.6 million today. The analysts are largely in agreement about this estimate.
• 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 169.7x on those 2028 earnings, up from -63.8x today. This future PE is greater than the current PE for the US Biotechs industry at 15.4x.
• Analysts expect the number of shares outstanding to grow by 4.65% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.78%, as per the Simply Wall St company report.

Mirum Pharmaceuticals Future Earnings Per Share Growth

Risks

• Market expansion for Mirum's leading asset, Livmarli, across multiple rare liver disease indications and international geographies is outpacing initial expectations, which supports continued strong revenue growth and makes a long-term revenue slowdown less likely.
  
• Advancements in genetic testing and increased physician/patient awareness are leading to earlier and more frequent diagnosis of rare cholestatic diseases such as PFIC, which directly increases the addressable market size for Mirum and implies ongoing top-line momentum.
  
• Robust late-stage pipeline progress-including three pivotal studies with near-term data readouts and regulatory clarity for Fragile X syndrome-suggests the company may successfully diversify its revenue streams and achieve long-term earnings growth, positively impacting both revenue and net margins.
  
• Strategic partnerships, such as the Takeda collaboration in Japan, and ongoing reimbursement approvals in new markets indicate the international business is scaling rapidly, increasing the likelihood of operational leverage and improved net earnings over time.
  
• Demonstrated operational discipline, including cash flow positive operations, improving contribution margins above fifty percent, and a strong liquidity position, reduces financial risk and supports sustained profitability and net margin expansion in future years.

Valuation

• The assumed bearish price target for Mirum Pharmaceuticals is $56.92, which represents two standard deviations below the consensus price target of $78.27. This valuation is based on what can be assumed as the expectations of Mirum Pharmaceuticals'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 $89.0, and the most bearish reporting a price target of just $53.0.
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be $712.9 million, earnings will come to $23.3 million, and it would be trading on a PE ratio of 169.7x, assuming you use a discount rate of 6.8%.
• Given the current share price of $74.34, the bearish analyst price target of $56.92 is 30.6% lower. Despite analysts expecting the underlying buisness to improve, they seem to believe the market's expectations are too high.
• 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.