AFFIRM-AL And Alzheimer's Trials Will Unlock New Opportunities

Key Takeaways

• Successful clinical trials for Birtamimab and Alzheimer's treatments could significantly boost Prothena's revenue through large market opportunities.
  
• Strategic partnerships and a strong financial position support pipeline advancement and potential long-term earnings growth.
  
• Uncertainty in FDA approval and potential competition may delay birtamimab commercialization and impact Prothena's financial resources and revenue growth prospects.

Catalysts

A late-stage clinical biotechnology company, focuses on discovery and development of novel therapies to treat diseases caused by protein dysregulation in the United States.

• Prothena's wholly-owned drug candidate, Birtamimab, is nearing a significant inflection point with expected top-line results from the Phase III AFFIRM-AL trial in mid-2025. If successful, it could lead to a substantial revenue boost upon its potential U.S. launch in the second half of 2026 due to its large multi-billion dollar market opportunity for treating Mayo Stage IV AL amyloidosis patients.
  
• The potential first-in-class treatment for Alzheimer's disease, PRX012, might offer a unique once-monthly subcutaneous administration, reducing treatment burden and potentially gaining market share upon effective Phase I trial results in 2025. This innovation could lead to substantial revenue increases given the large, underserved Alzheimer's market.
  
• Prothena's second Alzheimer's program, PRX123, a dual A-beta and tau vaccine, has the potential of targeting the large presymptomatic segment of the Alzheimer's market, potentially accelerating future revenue growth if it progresses successfully through clinical stages.
  
• Strategic partnerships with major pharmaceutical companies, including BMS and Roche, leverage resources and expertise to advance Prothena's pipeline, potentially increasing long-term earnings through shared profits from partnered programs' successes, particularly in diseases like Parkinson's and ATTR amyloidosis.
  
• Prothena's solid financial position, with $472.2 million in cash and no debt as of 2024, provides a strong foundation for advancing its clinical trials and supporting future earnings growth through successful product launches and commercialization efforts.

Prothena Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Prothena's revenue will grow by 16.4% annually over the next 3 years.
• Analysts are not forecasting that Prothena will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Prothena's profit margin will increase from -90.5% to the average US Biotechs industry of 15.9% in 3 years.
• If Prothena's profit margin were to converge on the industry average, you could expect earnings to reach $33.8 million (and earnings per share of $0.64) by about May 2028, up from $-122.3 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 99.6x on those 2028 earnings, up from -4.3x today. This future PE is greater than the current PE for the US Biotechs industry at 20.4x.
• Analysts expect the number of shares outstanding to grow by 0.1% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.12%, as per the Simply Wall St company report.

Prothena Future Earnings Per Share Growth

Risks

• Uncertainty around FDA approval for birtamimab, particularly if Phase III AFFIRM-AL results do not meet predefined statistical significance, could delay commercialization and impact Prothena's future revenue projections.
  
• Potential competition in the treatment of AL amyloidosis from other emerging therapies, like daratumumab, might limit birtamimab’s market share, affecting anticipated revenue growth.
  
• Relatively high clinical development costs and net losses projected for 2025 could strain financial resources before birtamimab or other therapies can generate significant earnings.
  
• The lack of demonstrated early mortality impact by existing plasma cell-targeting therapies like daratumumab sets a high bar for proving the market need and commercial viability of birtamimab, potentially impacting its uptake and, subsequently, net margins.
  
• Dependence on successful partnerships with large pharmaceutical companies and the outcome of clinical trials involving partnered products, such as prasinezumab and coramitug, introduces execution and collaboration risks that could influence long-term earnings.

Valuation

• The analysts have a consensus price target of $51.75 for Prothena 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 $110.0, and the most bearish reporting a price target of just $20.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $213.2 million, earnings will come to $33.8 million, and it would be trading on a PE ratio of 99.6x, assuming you use a discount rate of 7.1%.
• Given the current share price of $9.69, the analyst price target of $51.75 is 81.3% 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.