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On Friday, H.C. Wainwright analyst Raghuram Selvaraju increased the price target on Verona Pharma (NASDAQ:VRNA) to $75.00, up from the previous $60.00, while reiterating a Buy rating on the stock. The adjustment follows a valuation based on a discounted cash flow (DCF) methodology. The new target falls within the current analyst range of $60-90, with VRNA trading at $67.12, near its 52-week high of $69.80. According to InvestingPro analysis, the stock appears overvalued at current levels.
Selvaraju’s valuation assumes a 90% probability of approval for the company’s drug, ensifentrine, in the European market. The drug has already received approval in the United States. The analyst employed a 10% discount rate and a 1% terminal rate of decline. These variables contribute to a total enterprise value of $6.55 billion and a total firm value of $6.83 billion, leading to the new price target of $75 per American Depositary Share (ADS). The company currently maintains a market capitalization of $5.49 billion, with impressive gross profit margins exceeding 90%. InvestingPro subscribers can access 14 additional key insights about VRNA’s financial health and market position.
The analyst also outlined potential risks for Verona Pharma’s stock. These include the possibility of a slower-than-expected commercial uptake of ensifentrine in the U.S. market due to stronger competitive pressures or other market challenges. Additionally, there is the risk of failing to fully capitalize on the value of ensifentrine in markets outside the U.S., particularly Europe. Despite these risks, VRNA has demonstrated remarkable market performance, with a 288.88% return over the past year. For comprehensive risk analysis and detailed financial metrics, investors can access VRNA’s Pro Research Report, available exclusively on InvestingPro.
Another concern is the potential partnership risk if Verona decides to enter into collaborations to optimize the global value of ensifentrine. Moreover, negative outcomes from further ensifentrine trials could impact the company’s valuation. Lastly, there is the possibility of long-term dilution risk for the shareholders.
The price target increase reflects the analyst’s confidence in the commercial potential of ensifentrine as well as the company’s valuation based on the DCF methodology. Verona Pharma’s stock price may be influenced by these factors as the market processes the new information.
In other recent news, Verona Pharma reported fourth-quarter earnings that exceeded analyst expectations, driven by robust sales of its newly launched COPD treatment, Ohtuvayre. The company posted adjusted earnings per share of -$0.05, surpassing the analyst consensus of -$0.07. Revenue for the quarter reached $35.65 million, significantly beating estimates of $6.14 million. Ohtuvayre, approved in June 2024, achieved net product sales of $36.6 million in the fourth quarter, contributing to full-year 2024 net sales of $42.3 million. The company noted that over 4,600 healthcare professionals have prescribed Ohtuvayre, with approximately 55% of their Tier 1 healthcare providers participating. Verona Pharma’s cash position was strong at $399.8 million as of December 31, 2024, compared to $271.8 million a year earlier. Looking forward, Verona plans to initiate a Phase 2b trial for a fixed-dose combination of ensifentrine and glycopyrrolate in the second half of 2025. Additionally, the company is advancing regulatory activities for potential marketing authorization submissions in the European Union and UK.
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