The first exception is with Regeneron Pharmaceuticals. It trades at 7.71 times EYLEA’s peak sales while Alexion trades at 5.15 times Soliris’ peak sales. The reason this is significant is because Soliris has higher sales potential. However, Regeneron also has a larger pipeline, including 12 in its pipeline, and a Phase 3 cholesterol drug called Alirocuma that could reach sales in excess of $3 billion annually. Thus, Soliris has more peak sales potential than EYLEA – but Regeneron has a more significant pipeline – as Alexion’s pipeline is built around additional indications of Soliris.
The second exception is with Aegerion Pharmaceuticals, Inc. (NASDAQ:AEGR). The company is the most expensive of all when comparing peak sales to targeted valuations. Yet, Juxtapid has the lowest peak sales potential of any drug that is charted. Sarepta Therapeutics’ drug Eteplirsen has almost three times the sales potential of Juxtapid and its targeted valuation is only a fraction compared to that of Aegerion. Therefore, it is hard to determine why Canaccord insisted on issuing such a bullish price target.
Personally, I think Aegerion is setting itself up for major post-launch losses. Right now the stock is trading higher on momentum, and investors are losing sight of the drug’s limited sales potential. While Aegerion Pharmaceuticals, Inc. (NASDAQ:AEGR)management has raised Juxtapid’s price tag, I tend to lean more towards the FDA – and data that shows only 315 U.S. occurrences of homozygous familial hypercholesterolemia. Thus, I believe $250 million in revenue will be a tough feat for the company.
In biotechnology, sales compared to valuation is what ultimately creates value – and products that have larger sales potential warrant a more expensive valuation relative to sales. Aegerion Pharmaceuticals, Inc. (NASDAQ:AEGR) might in fact have a great product, and might in fact be a great company. However, we are not arguing these two points. We are discussing whether Aegerion’s price target of $90 is too expensive. Based on the comparisons that I have shown, there is little doubt that Canaccord’s $90 price target is way too excessive.
Brian Nichols is long SRPT. The Motley Fool has no position in any of the stocks mentioned.
The article A $90 Price Target for This Biotech! How’s It Figured? originally appeared on Fool.com.
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