NAD Market Competition And Regulatory Risks Will Challenge Margins Yet Support Long-Term Healthy Aging Demand

Catalysts

About Niagen Bioscience

Niagen Bioscience develops and commercializes clinically validated NAD boosting ingredients and products that target healthy aging and metabolic health.

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

• Although demand for evidence based healthy aging solutions is rising, and Tru Niagen revenue grew 44 percent year over year, the company faces intensifying competition from lower quality NAD offerings and NMN suppliers. This competition could cap long term pricing power and pressure gross margins as category penetration increases.
• While the rapidly expanding telehealth and at home injection markets could open a much larger addressable base for Niagen Plus, execution risk around building proprietary telehealth capabilities and potential delays in partner uptake may limit the near term revenue contribution from this channel.
• Although ongoing and upcoming clinical readouts in long COVID, Parkinson's disease and AT may eventually support premium positioning and potential pharma monetization, any adverse or inconclusive data, regulatory setbacks or slower than expected trial timelines would constrain the ability to translate the R and D spend into earnings growth.
• While the shift toward scientifically substantiated nutrition and regulatory scrutiny of unproven NAD products favors Niagen's evidence base and patent portfolio, enforcement uncertainty around NMN and patent challenges could dilute the competitive moat and slow the anticipated improvement in ingredient revenue and net margins.
• Although international and practitioner led distribution, including access to more than 8,000 health care providers and expansion in Asia Pacific, should support sustained top line growth, dependence on a concentrated set of partners and potential channel specific volatility could introduce earnings variability and limit operating leverage.

Assumptions

This narrative explores a more pessimistic perspective on Niagen Bioscience 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 Niagen Bioscience's revenue will grow by 19.5% annually over the next 3 years.
• The bearish analysts assume that profit margins will increase from 16.4% today to 19.6% in 3 years time.
• The bearish analysts expect earnings to reach $41.7 million (and earnings per share of $0.53) by about December 2028, up from $20.4 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 31.3x on those 2028 earnings, up from 25.6x today. This future PE is lower than the current PE for the US Life Sciences industry at 34.4x.
• The bearish analysts expect the number of shares outstanding to grow by 2.79% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.72%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• The long term expansion of the NAD market is attracting a growing number of competitors, including NMN and NAD product suppliers that often disregard regulatory guidance and patents. This competitive pressure could force Niagen Bioscience to lower prices or increase marketing spend and eventually weigh on revenue growth and net margins.
• Reliance on premium priced IV and injection offerings in clinics, where compounded products are currently positioned as a luxury service, risks limiting volume growth until pricing resets and telehealth adoption scales. This could constrain the Niagen Plus opportunity and cap future earnings expansion.
• Key growth drivers such as at home injection kits, proprietary telehealth capabilities and GLP 1 combination use are still at an early stage with limited uptake data and multi quarter delays before full rollout. This raises the possibility that these initiatives ramp more slowly than expected and dampen revenue and earnings momentum.
• Future value creation is partly tied to pharmaceutical pathways in indications like Parkinson's disease and ataxia telangiectasia, where pending clinical readouts, regulatory feedback and potential partnering outcomes remain uncertain. Any negative or inconclusive developments could undermine the long term earnings potential implied by current expectations.

Valuation

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

• The assumed bearish price target for Niagen Bioscience is $12.0, which represents up to two standard deviations below the consensus price target of $15.8. This valuation is based on what can be assumed as the expectations of Niagen Bioscience'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 $23.0, and the most bearish reporting a price target of just $12.0.
  
• In order for you to agree with the more bearish analyst cohort, you'd need to believe that by 2028, revenues will be $212.8 million, earnings will come to $41.7 million, and it would be trading on a PE ratio of 31.3x, assuming you use a discount rate of 7.7%.
  
• Given the current share price of $6.52, the analyst price target of $12.0 is 45.7% 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.