Genmab — April 2017
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Visse analytikere har et topsalgsestimat på 8 mia $ i MM alene. Hvis vi antager at det holder, så er 2.+ linje ca 4 mia værd. Og det er hvad dagens kurs ca afspejler. 2. linje ww er med andre ord fuldt indregnet. Det kan da godt være at EMA-godkendelse vil give lidt stigning, men næppe meget. Det helt helt afgørende er gode Alcyone-data, som vil sparke døren ind til 1. linje og dermed til den anden halvdel af markedet.
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Dear Genmab believers, I often see comments about “Dara MM sales fully priced in”. If you have 5 minutes, read these comments and I will promise you you’ll have a great Easter Sunday!
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Based on multiple drivers I believe Dara in MM is not fully priced in. And this has everything to do with the analyst projections, these just don’t reflect the data.
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What drives this?: 1) Analysts don’t have the courage to reflect the real data in their models (with a price target of +50% or even +100% they would look like fools to their customers, nobody has the courage to do this) 2) The penetration assumptions in first and second line are still very low
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- Also the treatment duration per patient is very low. Analysts are accounting for 24 months Dara treatment, while we already saw in the Pollux data that the PFS is going +50 months, regarding first line we’ve already heard some doctors speaking of Dara maintenance in the range of 5 years till 10 years.
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SO, LET THIS ALL SINK IN FOR A MOMENT….
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Average analyst model: low penetration in first line (20% - 50%) and 24 months Dara treatment, what if this gets updated to 60% - 75% first line penetration and 7,5 years of Dara treatment??! Conclusion: The current MM peak sales estimation is far from what it will be in 10 – 15 years from now. I believe the MM only sales will go to 15 – 20 billion.
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So what does this say, and how can you find out? There’s only one way and that is by making the calculations yourself.
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I did some calculations, based on the 15 and 20 billion peak sales scenario’s. And I put in a few very soft assumptions: 1) Total shares outstanding in 2030: 65 million (currently 61 million) 2) Net profit margin Genmab in 2030: 75% (With such high royalty income the margin in reality will be significant higher) 3) Average royalty: 18% 4) Currency USD/DKK: 7.00 DKK per 1 USD
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Based on these assumptions and a stock price of 2500 DKK the P/E will be: 15 billion USD peak sales = +/- 19 billion DKK royalty, 75% net profit = 14.2 billion DKK net profit = 11 P/E 15 billion USD peak sales = +/- 25 billion DKK royalty, 75% net profit = 18.9 billion DKK net profit = 8 P/E J&J at the moment has a P/E of 18 and Roche of 22, off course P/E’s at the moment are quite high however
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this would mean that with a stock price 4000 DKK and the assumptions above Genmab would still be under the P/E of J&J.
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LET THAT SINK IN: 4000 DKK would mean: 15 billion USD peak sales = 17 P/E 20 billion USD peak sales = 13 P/E
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Thus, when the penetration data and the duration of treatment per patient will reflect the reality, the peak sales will go up significantly, maybe even double from the current level. Therefore the stock price has room to move up to 4000 DKK based on MM alone.
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The real question is, do analyst have the courage to reflect the real data in their models? I believe this will happen, however will go very gradually: stock moves higher > analysts update their models. Of course this will not fully happen in the next 2 years, however when we keep getting good data (Pollux PFS updates, ORR in Alcyone study and faster than expected sales growth) the analysts will definitely have to update their models fast.
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Would love to hear what you guys think, maybe I missed something. However, I believe the direction I’m going is sound. The assumptions of the analyst are very very low and with the data we’ve already seen the peak sales is going to beg significantly higher. Next time I’ll write a blog post
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