3 Post-Pandemic Turnaround Plays (Pt 1)
- BPIQ
- Apr 15, 2022
- 4 min read
Updated: Apr 18, 2022
Summary:
Since the COVID-19 pandemic started in 2020, the valuation of many smid-cap biopharma companies with recently approved products have suffered
In this Pt. 1 we evaluate 3, early-commercial smid-cap biopharma companies that have been negatively affected by the ongoing pandemic, but who appear poised to rebound in a post-pandemic environment
Get Amp Research's favorite pick of these along with a deeper analysis, see our full forum post HERE after subscribing (learn more here!)
Subscribers see our Bull Bear posts here: GBT bull/bear, CHRS bull/bear, GTHX bull/bear
Since the COVID-19 pandemic started in 2020, many smid-cap biopharma companies with recently approved therapeutics have suffered because of lower than expected commercial revenue. In this Part 1, we take a look at 3 of these companies. These companies are CHRS, GBT, and GTHX. Table 1 lists information regarding the valuable early commercial asset for each of these companies. Table 1 also provides a link to Amp's Bull/Bear thesis for these companies. Table 2 provides a number of key financial attributes for these companies focusing on revenue and current revenue/enterprise value multiples. Each of these companies currently is a relatively high risk value plays for a smid-cap biopharma company. Despite challenges over the last few years, the stock price of these companies have a reasonable chance for rebounding if the pandemic fades and people return to the doctor's office/elective surgeries. Plus, with relatively recently approved promising therapeutics, these companies are attractive M&A targets.
In this 1st group of 3 early-commercial smid-cap companies (see Table 1), 2 (CHRS and GBT) of the 3 companies had product revenue in 2020, and 1 (GBT) of these 2 companies had more 2021 revenue than 2020 revenue (GBT), whereas CHRS had declining product revenues. And GTHX launched their first new product in 2021.
Only 1 of these companies, GTHX, has given 2022 guidance (see Table 1), which projects a significant increase in 2022 revenue compared to 2021. Investors should consider these companies with their eyes wide open to the risk of the pandemic coming back with a vengeance, which would likely create serious challenges for these companies and continue to depress their stock prices. Of course, last year's revenue disappointments and future uncertainty is what have depressed the valuations (share price) of these companies well below their all-time highs, although GBT and GTHX are trading above the industry average ~6X revenue/market cap multiple (Table 1 shows revenue and EV) (https://www.ifbc.ch/wp-content/uploads/2022/04/ifbc-sector-report-life-sciences-healthcare.pdf). And CHRS is currently more of a biosimilars company with decreasing revenue, which likely explains its current multiple of around 3X, less than 1/3 that of GBT and GHTX. If healthcare gets back to closer to normal in the U.S. in 2022, these companies have significant upside.
CHRS is a pretty unique smid-cap biopharma in that it was primarily a biosimilars company that is transitioning to a patented therapeutics company. CHRS’s biosimilar asset UDENYCA (pegfilgrastim biosimilar) was approved over a year before the COVID-19 pandemic. After an impressive first year, UDENYCA sales disappointed in 2021: Not only was other biosimilar competition growing, but the name brand has an on-body infusion version that appeared to gain in popularity during the pandemic. Despite 4 possible launches over the next 4 months, most revenue in 2022 for CHRS will still likely be from UDENYCA, and CHRS's own on body injector version won't be available until 2023. Thus, the willingness of patients to visit a healthcare provider for an injection of UDENYCA will be important for UDENYCA 2022 revenue.
While GBT 2021 revenue for its sickle cell drug, Oxbryta, was higher than 2020, the results were still disappointing as the street expected more. Like every company in this article, GBT said that the pandemic was at least partially to blame for missing revenue targets. The company has not provided 2022 revenue guidance and has an EV/2021 revenue ratio of 11, which is higher than the other companies on the list and the biotech mean at around 6X. The challenge for GBT is that Oxbryta is for reducing long-term organ damage. And in a pandemic, patients apparently don't like the tradeoff of the long-term benefit vs. a short-term risk of getting infected with Covid while visiting a health provider.
GTHX is the lowest value company on this list, with an EV of less than $200M at the time we published this. It had a tough year in 2021 with less than $12M in annual revenue from its launch of COSELA. COSELA protects certain blood cells from the effects of chemo and may have independent in-vivo anti-proliferative effects on cancer cells. With its current SCLC indication, there is a relatively small market for COSELA currently. and GTHX has not successfully launched a therapeutic before. However, the company has guided to almost $50M of Cosella revenue in 2022, emboldened by having its own newly-hired, and focused commercial team selling the product with better access to physicians. COSELA could be approvable in at least a number of additional cancers that are much more prevalent based on its mechanism of action, which could increase revenue substantially long-term.
For Amp Research's favorite pick of these 3 companies, along with a deeper analysis, see their full forum post HERE after subscribing (learn more here!)
Table 1. 3 Post-Pandemic Turnaround Plays
Table 2. Financial Info Re: Turn-Around Plays
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