Legend Biotech Corporation (NASDAQ:LEGN) has captured the attention of investors and analysts alike with its innovative CAR-T therapy, Carvykti, which is rapidly gaining traction in the treatment of multiple myeloma. Trading at $32.77, near its 52-week low and significantly below its peak of $70.13, the $6.02 billion market cap company has seen its stock decline 46% year-to-date. As the company navigates a competitive landscape and regulatory challenges, this volatility prompts a closer examination of its potential and risks. According to InvestingPro analysis, the stock appears undervalued based on its Fair Value metrics.
Carvykti, Legend Biotech's flagship product developed in partnership with Johnson & Johnson, has demonstrated strong efficacy in treating multiple myeloma, particularly in later lines of therapy. The drug's performance has been impressive, with sales reaching $186 million in the second quarter of 2024, representing an 18% quarter-over-quarter growth and beating consensus estimates.
The company's focus on expanding manufacturing capacity is paying off, with management projecting over $900 million in Carvykti revenue for 2024. This growth trajectory is supported by increasing demand and the potential for label expansions into earlier lines of treatment. The CARTITUDE clinical trial program continues to yield positive results, with data showing significant overall survival benefits compared to standard of care in second to fourth-line treatments.
Legend Biotech's partnership with Johnson & Johnson provides a strong commercial foundation, leveraging the larger company's expertise in the multiple myeloma space. This collaboration has been instrumental in Carvykti's successful launch and ongoing market penetration.
However, the company faces challenges on multiple fronts. Competition in the CAR-T therapy space is intensifying, with rivals like Gilead Sciences (NASDAQ:GILD) and Arcellx developing their own treatments. The potential approval of anito-cel, a competing therapy, in the fourth-line-plus multiple myeloma setting could impact Carvykti's market share.
Regulatory concerns have also weighed on investor sentiment. The BioSecure Act, which aims to restrict certain foreign investments in U.S. biotechnology companies, initially raised concerns about its potential impact on Legend Biotech. However, management has reassured investors that the company's operating model should insulate it from direct effects of the legislation.
Safety concerns surrounding CAR-T therapies, including rare instances of Parkinsonism and secondary malignancies, have prompted increased scrutiny from the FDA. While these issues are not specific to Carvykti, they could affect the broader adoption of CAR-T therapies.
Financially, Legend Biotech reported a solid cash position of $1.2 billion as of the third quarter of 2024, providing runway for ongoing clinical development and commercial activities. InvestingPro data reveals impressive revenue growth of 123% over the last twelve months, with a strong current ratio of 4.98 indicating robust liquidity. However, the company continues to operate at a loss, with negative EPS projections of -$1.56 for 2024 as it invests in growth and expansion. InvestingPro subscribers have access to 8 additional key financial metrics and tips that provide deeper insights into LEGN's financial health.
Bear Case
How might increasing competition in the CAR-T space impact Carvykti's market share?
As the CAR-T therapy landscape becomes more crowded, Carvykti may face challenges in maintaining its market leadership. The potential approval of anito-cel from Gilead Sciences and Arcellx could introduce a strong competitor, particularly if it demonstrates a superior safety profile or efficacy in certain patient populations. This competition could lead to pricing pressures and potentially slower adoption rates for Carvykti, especially in later lines of treatment where multiple options may be available.
Additionally, as more CAR-T therapies enter the market, healthcare providers may become more selective in their treatment choices, potentially fragmenting the market share. This could result in slower growth for Carvykti and impact Legend Biotech's revenue projections. The company will need to continue demonstrating Carvykti's differentiated benefits and invest in physician education to maintain its competitive edge.
What are the potential risks associated with manufacturing scale-up and supply chain management?
As Legend Biotech aims to meet the growing demand for Carvykti, scaling up manufacturing capacity presents significant challenges. The production of CAR-T therapies is complex and requires specialized facilities and expertise. Any issues in the manufacturing process could lead to supply constraints, potentially limiting Carvykti's availability and impacting sales growth.
Moreover, the company's reliance on contract manufacturing organizations and its partnership with Johnson & Johnson introduces additional supply chain complexities. Disruptions in raw material supply, quality control issues, or logistical challenges could result in production delays or batch failures. Such setbacks could not only affect revenue but also damage relationships with healthcare providers and patients, potentially opening the door for competitors to gain market share.
Bull Case
How could label expansions into earlier treatment lines drive Carvykti's growth?
The potential expansion of Carvykti's label to include earlier lines of treatment represents a significant growth opportunity for Legend Biotech. Current clinical data, particularly from the CARTITUDE-4 trial, has demonstrated superior efficacy compared to standard of care in second-line and later treatments. If Carvykti receives approval for use in earlier treatment lines, it could substantially increase the addressable patient population.
Moving into earlier lines of therapy could also lead to improved patient outcomes, as patients may benefit from CAR-T therapy before their disease progresses further. This could drive increased adoption among oncologists and solidify Carvykti's position as a preferred treatment option. With the multiple myeloma market projected to grow significantly in the coming years, earlier line approvals could potentially push Carvykti's peak sales beyond the current estimates of $10 billion annually.
What advantages does Legend Biotech's partnership with Johnson & Johnson provide?
Legend Biotech's collaboration with Johnson & Johnson, through its Janssen Biotech subsidiary, provides several strategic advantages. Johnson & Johnson's extensive experience in the multiple myeloma market and its global commercial infrastructure offer Legend Biotech access to established distribution channels and marketing expertise. This partnership has been crucial in the successful launch and rapid adoption of Carvykti.
Furthermore, Johnson & Johnson's financial resources and research capabilities complement Legend Biotech's innovative approach, potentially accelerating the development of new indications and improvements to the Carvykti platform. The partnership also lends credibility to Legend Biotech in the eyes of investors and the medical community, which can be particularly valuable for a relatively young biotech company.
As Carvykti expands into new geographical markets, Johnson & Johnson's global presence can facilitate smoother regulatory processes and market entry strategies. This collaboration positions Legend Biotech to compete effectively against larger pharmaceutical companies in the rapidly evolving CAR-T therapy space.
SWOT Analysis
Strengths:
- Strong efficacy data for Carvykti in multiple myeloma treatment
- Strategic partnership with Johnson & Johnson providing commercial and development support
- Expanding manufacturing capacity to meet growing demand
- Solid cash position of $1.2 billion as of Q3 2024
Weaknesses:
- Reliance on a single commercial product (Carvykti)
- Negative EPS projections in the near term
- Complex and costly manufacturing process for CAR-T therapies
Opportunities:
- Potential label expansions for Carvykti into earlier lines of treatment
- Geographic expansion into ex-U.S. markets
- Diverse pipeline beyond Carvykti for future growth
- Increasing adoption of CAR-T therapies in oncology
Threats:
- Intensifying competition in the CAR-T therapy space
- Regulatory risks, including potential safety concerns and FDA scrutiny
- Possible impact of the BioSecure Act on foreign investments
- Manufacturing and supply chain challenges in scaling production
Analysts Targets
As of December 30, 2024, with LEGN trading at $32.77, analyst ratings and price targets suggest significant upside potential. InvestingPro data shows a strong bullish consensus among analysts with a 1.64 rating (where 1 is Strong Buy and 5 is Strong Sell). The current price targets are as follows:
- Piper Sandler: $78 price target, Overweight rating (December 30, 2024)
- BMO Capital Markets: $90 price target, Outperform rating (December 10, 2024)
- H.C. Wainwright & Co: $73 price target, Buy rating (December 10, 2024)
- Cantor Fitzgerald: $83 price target, Overweight rating (December 9, 2024)
- RBC Capital Markets: $86 price target, Outperform rating (November 13, 2024)
- Barclays (LON:BARC): $94 price target, Overweight rating (November 13, 2024)
The consensus among analysts remains bullish on Legend Biotech's prospects, with price targets ranging from $73 to $94. The average price target suggests significant upside potential from the current stock price, reflecting optimism about Carvykti's growth trajectory and the company's overall market position in the CAR-T therapy space.
Legend Biotech's future success will largely depend on its ability to navigate the competitive landscape, expand Carvykti's indications, and efficiently scale its manufacturing capabilities. While challenges remain, the company's strong partnership with Johnson & Johnson and promising clinical data position it well for potential long-term growth in the evolving field of cell therapy.
This analysis is based on information available up to December 30, 2024, and investors should continue to monitor Legend Biotech's progress and market developments for the most up-to-date assessment of the company's prospects. For comprehensive analysis and real-time updates, consider accessing Legend Biotech's detailed Pro Research Report, available exclusively on InvestingPro, which includes advanced financial metrics, Fair Value estimates, and expert insights to help make more informed investment decisions.
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