Rare Disease Expansion Will Drive Durable Long Term Upside In This Biotech

Catalysts

About Pharming Group

Pharming Group is a commercial-stage biotech company focused on developing and marketing innovative therapies for rare and ultra-rare diseases.

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

• Accelerating Joenja adoption in the 12 years and older APDS population, supported by 25 percent growth in treated patients and high adherence, is driving durable double-digit top line expansion and operating leverage that may continue to lift revenue and earnings.
• Forthcoming U.S. pediatric approval for Joenja in 4 to 11 year old patients, with 54 children already identified and one third on early access, creates a near-term step change in treated population size that can increase revenue visibility and cash flow.
• Reclassification of genetic variants and broader APDS recognition, including a potential 20 percent of U.S. PID patients being reclassified and emerging evidence that APDS may be more prevalent than previously assumed, could expand the addressable market and support multi-year revenue and earnings growth.
• Ongoing global expansion of Joenja, starting with a U.K. launch and targeted entry into up to eight high-value markets, offers a runway of incremental geographic sales that can diversify the revenue base and enhance net margins as fixed costs are leveraged.
• RUCONEST’s role as an option for more severe, high attack frequency HAE patients, with continued prescriber and patient growth alongside new competition, provides a high margin cash engine that can fund late-stage pipeline assets and support operating profit.
• Advancement of late-stage and proof of concept programs, including KL1333 for primary mitochondrial disease and basket PID and CVID indications for Joenja, positions Pharming to pursue multiple potential larger-scale franchises that can influence the earnings profile and long-term valuation.

Assumptions

This narrative explores a more optimistic perspective on Pharming Group compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts. How have these above catalysts been quantified?

• The bullish analysts are assuming Pharming Group's revenue will grow by 12.2% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 0.1% today to 26.9% in 3 years time.
• The bullish analysts expect earnings to reach $137.7 million (and earnings per share of $0.1) by about December 2028, up from $382.0 thousand today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as $-49.3 million.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 9.9x on those 2028 earnings, down from 3048.5x today. This future PE is lower than the current PE for the GB Biotechs industry at 3087.3x.
• The bullish analysts expect the number of shares outstanding to decline by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 5.39%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• RUCONEST is increasingly concentrated in a narrow, more severe HAE patient segment and is being withdrawn from multiple ex U.S. markets. Any future shift in treatment standards or wider adoption of new oral competitors for severe patients could erode this niche, reducing revenue growth and weakening the high gross margin cash engine that underpins earnings.
• The growth thesis for Joenja relies heavily on regulatory expansion, reclassification of variants and much higher APDS prevalence estimates. If lab reclassification is slower than expected, regulatory timelines slip or real world prevalence proves lower than the Cell publication suggests, Joenja uptake could fall short of bullish expectations, pressuring long term revenue and earnings targets.
• Pharming is ramping a broader late stage pipeline, including KL1333 and basket PID and CVID programs, while also pursuing disciplined M&A. Any clinical setbacks, delays or value dilutive acquisitions could turn today’s high R&D and transaction spending into sunk cost, compressing net margins and limiting future earnings leverage.
• The strategy assumes continued ultra high gross margins in the low to mid 90s and rising operating leverage. Increased reliance on a single ultra rare disease franchise and payer pushback during Joenja’s international reimbursement negotiations could trigger price pressure or access constraints, lowering gross margin and operating profit expansion over time.
• Management is cutting G&A head count and exiting lower margin RUCONEST geographies to optimize capital deployment. If these cost actions impair commercial execution, patient identification or access initiatives in rare diseases, the company may see slower new patient adds and weaker Joenja and RUCONEST trajectory, dampening revenue growth and earnings scalability.

Valuation

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

• The assumed bullish price target for Pharming Group is €2.45, which represents up to two standard deviations above the consensus price target of €2.11. This valuation is based on what can be assumed as the expectations of Pharming Group's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €2.45, and the most bearish reporting a price target of just €1.7.
  
• In order for you to agree with the more bullish analyst cohort, you'd need to believe that by 2028, revenues will be $512.0 million, earnings will come to $137.7 million, and it would be trading on a PE ratio of 9.9x, assuming you use a discount rate of 5.4%.
  
• Given the current share price of €1.44, the analyst price target of €2.45 is 41.2% 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.