Hepatitis Delta Headwinds And Oncology Uncertainty Will Eventually Support A Modest Recovery

Catalysts

About Vir Biotechnology

Vir Biotechnology is a clinical stage immunology company developing therapies that harness and modulate the immune system to treat serious infectious diseases and cancer.

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

• Although the hepatitis delta ECLIPSE registrational program is advancing ahead of internal timelines in a market with no approved therapies in the United States, any delay in achieving pivotal data or regulatory approvals could push out the anticipated launch window and prolong significant net losses.
• While the growing global focus on viral hepatitis testing and diagnosis expands the pool of identified HDV patients and supports a concentrated specialty commercial model, competitive dynamics from earlier bulevirtide entry and potential pricing pressures in Europe may limit peak revenue capture and compress gross margins.
• Although the PRO-XTEN masked T cell engager platform benefits from increasing adoption of immuno oncology and the trend toward targeted biologics, failure to demonstrate clear differentiation in safety and durability versus emerging PSMA, HER2 and EGFR agents could result in slower uptake and weaker long term oncology revenue contribution.
• While an extended cash runway into mid 2027 provides capacity to fund current clinical plans without near term dilution, higher than expected development costs from multiple concurrent oncology and hepatitis programs could erode this buffer and weigh on future earnings and cash flow.
• Although expanding collaboration and partnering opportunities around the PRO-XTEN platform could diversify income streams over time, unfavorable deal structures or partner driven program deprioritizations would constrain milestone and royalty inflows and limit upside to operating margins.

Assumptions

This narrative explores a more pessimistic perspective on Vir Biotechnology 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 Vir Biotechnology's revenue will decrease by 56.3% annually over the next 3 years.
• The bearish analysts are not forecasting that Vir Biotechnology will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Vir Biotechnology's profit margin will increase from -2963.5% to the average US Biotechs industry of 16.0% in 3 years.
• If Vir Biotechnology's profit margin were to converge on the industry average, you could expect earnings to reach $225.7 thousand (and earnings per share of $0.0) by about December 2028, up from $-499.7 million today.
• 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 9520.8x on those 2028 earnings, up from -1.9x today. This future PE is greater than the current PE for the US Biotechs industry at 19.0x.
• The bearish analysts expect the number of shares outstanding to grow by 1.45% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.23%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• Vir Biotechnology remains a loss-making company with third quarter 2025 net loss of 163.1 million dollars and annualized operating expenses in the hundreds of millions. Any delay or failure in securing regulatory approvals or positive pivotal data for the ECLIPSE hepatitis delta program could extend this loss making period and pressure earnings and cash flow over the long term.
• The hepatitis delta opportunity is concentrated in a relatively small, though high unmet need, population of around 61,000 viremic patients in the United States and 113,000 in the European Union. Slower than expected HDV screening, diagnosis and treatment adoption or physician preference for bulevirtide as an earlier entrant could materially limit the revenue ramp and peak sales from Vir's lead combination regimen.
• Long term oncology growth is highly dependent on the PRO XTEN T cell engager platform demonstrating clear differentiation in safety, durability of response and convenience versus competing PSMA, HER2 and EGFR targeted agents. If forthcoming VIR 5500 and related data readouts show only modest or non durable efficacy, capital will be consumed without generating the scale of oncology revenue and margin expansion implied by a bullish share price outlook.
• Despite an 810.7 million dollar cash balance and a projected runway only into mid 2027, Vir's multi asset, multi indication clinical strategy requires sustained high research and development spending. Cost overruns, additional late stage trials or negative data that force program resets could necessitate dilutive equity financing that weighs on per share earnings and investor returns.
• The long term secular tailwinds in immuno oncology and viral hepatitis could attract larger, better capitalized competitors and shift standard of care toward alternative mechanisms such as cell therapies, radioligands or next generation antivirals. If Vir's assets are perceived as incremental rather than best in class, pricing power, gross margins and long run revenue growth could fall short of expectations.

Valuation

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

• The assumed bearish price target for Vir Biotechnology is $12.0, which represents up to two standard deviations below the consensus price target of $17.22. This valuation is based on what can be assumed as the expectations of Vir Biotechnology'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 $31.0, 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 $1.4 million, earnings will come to $225.7 thousand, and it would be trading on a PE ratio of 9520.8x, assuming you use a discount rate of 7.2%.
  
• Given the current share price of $6.69, the analyst price target of $12.0 is 44.2% 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.