On Tuesday, BofA Securities adjusted its outlook on Apellis Pharmaceuticals (NASDAQ:APLS), reducing the price target to $47.00 from the previous $61.00 while maintaining a Buy rating on the stock. The firm's analysis followed Apellis Pharmaceuticals' third-quarter earnings report, which showed Syfovre revenues of $152 million, a 2% decrease quarter-over-quarter and below market expectations.
The company's management indicated that the third quarter's Gross-to-Net (GtN) was affected by competitive dynamics, which countered the 7% quarter-over-quarter demand growth. They forecast that GtN would fall within the low to mid-20% range by 2025. Management also pointed out a general slowdown in the Geographic Atrophy (GA) market, despite efforts to expand it through various initiatives. These strategies include targeting healthcare providers who do not typically administer injections, engaging with new prescribers, and amplifying direct-to-consumer marketing efforts.
Apellis saw a rebound in its share of new prescriptions, nearly reaching 50%. However, management cautioned that market expansion efforts will require time, and they anticipate growth in the fourth quarter to be in the low single digits. They are contemplating issuing full-year 2025 guidance to provide clearer insights into the near-term growth trajectory of their product launch.
In light of these trends, BofA Securities has taken a more conservative view on the long-term opportunity in GA, now estimating peak sales of $2 billion, down from the previous $2.5 billion. This adjustment has also influenced the valuation, with the contribution to share price recalculated at $44 from the earlier estimate of $59.
Despite the revised figures and the challenges in growing the GA market, BofA Securities maintains that the current valuation does not fully reflect the potential size of the opportunity. The firm also suggests that the potential launch in C3G/IC-MPGN could help balance the slower growth in GA, citing the strong competitive profile showcased in the VALIANT study. BofA Securities reaffirms its Buy rating with the new price objective of $47.00.
In other recent news, Apellis Pharmaceuticals reported third-quarter results that didn't meet analyst expectations, with both revenue and losses missing estimates. The biopharmaceutical company registered a Q3 loss of $0.46 per share, a higher loss than the predicted $0.29. Revenue for the quarter was $196.83 million, falling short of the consensus estimate of $200.09 million.
Apellis generated $152.0 million in U.S. net product revenue from its treatment SYFOVRE, an increase from $75.3 million last year. Despite this, the net selling price of SYFOVRE declined due to higher gross-to-net adjustments. The company also reported that SYFOVRE commercial vial demand grew approximately 7% quarter-over-quarter.
CEO Cedric Francois expressed the company's commitment to reaching more patients and strengthening its market leadership, despite SYFOVRE net sales not meeting expectations. Apellis also reported $24.6 million in U.S. net product revenue for its treatment EMPAVELI. The company ended the quarter with $396.9 million in cash and cash equivalents, stating that its financial position and projected revenues should fund operations until it reaches positive cash flow.
InvestingPro Insights
To complement BofA Securities' analysis, InvestingPro data offers additional context on Apellis Pharmaceuticals' financial position. Despite the challenges in the Geographic Atrophy market, the company has shown impressive revenue growth, with a 240.74% increase over the last twelve months as of Q2 2024. This aligns with the InvestingPro Tip that analysts anticipate sales growth in the current year.
However, profitability remains a concern. The company's operating income margin stands at -49.8%, and an InvestingPro Tip indicates that analysts do not anticipate the company will be profitable this year. This supports BofA's more conservative approach to valuation.
Interestingly, Apellis is trading near its 52-week low, with a price that is only 36.68% of its 52-week high. This could present an opportunity for investors who agree with BofA's maintained Buy rating, especially considering that the InvestingPro Fair Value is estimated at $33.33, above the current trading price.
For investors seeking a more comprehensive analysis, InvestingPro offers 8 additional tips for Apellis Pharmaceuticals, providing a deeper understanding of the company's financial health and market position.
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