Developing Tau-Targeting Therapies Will Open Doors But May Encounter Setbacks

Key Takeaways

• Strong partnerships and collaborations are expected to enhance revenue and earnings through milestone payments and shared R&D efforts.
  
• Innovative pipeline and TRACER platform for CNS therapies indicate significant future revenue potential and growth in neurological disease treatments.
  
• Voyager's reliance on Alzheimer’s tau-targeting and partnership milestones, along with cash runway dependency, could lead to financial instability and shareholder dilution risks.

Catalysts

A biotechnology company, focuses on the treatment of gene therapy and neurology diseases.

• Voyager's pipeline of 4 wholly owned and 14 partnered programs, including the completion of enrollment and dosing in the trial of their anti-tau antibody for Alzheimer's disease, represents a significant growth opportunity in the treatment of neurological diseases. This could lead to increased revenue and earnings if successful.
  
• The company's TRACER platform for CNS-targeted gene therapy and expectations for filing INDs for three programs next year suggest potential for future revenue growth and improved net margins through innovative treatments.
  
• Strong partnerships with leading companies such as Neurocrine, Novartis, and Alexion, along with new collaborations, are likely to enhance Voyager's revenue and earnings through milestone payments and shared R&D efforts.
  
• The focus on developing a tau-targeting approach for Alzheimer's, including an antibody and gene therapy, based on promising early data, has potential to significantly impact revenue and earnings by addressing a high-demand market.
  
• Voyager's cash position of $345 million, providing a runway into 2027, along with anticipated clinical milestones and partnership revenues, suggests a stable financial outlook and potential for earnings growth.

Voyager Therapeutics Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Voyager Therapeutics's revenue will decrease by -21.3% annually over the next 3 years.
• Analysts are not forecasting that Voyager Therapeutics will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Voyager Therapeutics's profit margin will increase from 15.8% to the average US Biotechs industry of 16.1% in 3 years.
• If Voyager Therapeutics's profit margin were to converge on the industry average, you could exepct earnigns to reach $12.8 million (and earnings per share of $0.23) by about January 2028, down from $25.9 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 90.1x on those 2028 earnings, up from 11.8x today. This future PE is greater than the current PE for the US Biotechs industry at 17.5x.
• Analysts expect the number of shares outstanding to grow by 1.3% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.46%, as per the Simply Wall St company report.

Voyager Therapeutics Future Earnings Per Share Growth

Risks

• Voyager's heavy reliance on its tau-targeting approach for Alzheimer's treatment is risky, as recent bepranemab data showed the primary endpoint was not met, which could result in similar setbacks or delayed revenue generation if Voyager's programs face comparable difficulties.
  
• The company is in preclinical stages for its blood-brain shuttle programs; any delays or failures in transitioning to clinical trials could impact long-term revenue due to missed strategic opportunities to capitalize on this innovative approach.
  
• Voyager’s financial health relies on milestone payments from partners like Novartis and Neurocrine; failure to achieve development milestones in partnered programs could impede cash flow and funding needed for future development, affecting earnings and long-term stability.
  
• The focus on securing the appropriate patient population for its Phase I trial suggests a narrow and cautious approach, which may result in a slower progression to market and delay potential revenue from these therapies.
  
• Voyager's pipeline is currently dependent on its ability to maintain its cash runway into 2027; unexpected costs, delays, or failures could lead to insufficient funds, impacting net margins and necessitating additional financing, which could be dilutive to shareholders.

Valuation

• The analysts have a consensus price target of $17.1 for Voyager Therapeutics 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 $30.0, and the most bearish reporting a price target of just $11.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $79.7 million, earnings will come to $12.8 million, and it would be trading on a PE ratio of 90.1x, assuming you use a discount rate of 6.5%.
• Given the current share price of $5.6, the analyst's price target of $17.1 is 67.3% higher. Despite analysts expecting the underlying buisness to decline, they seem to believe it's more valuable than what the market thinks.
• 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.