Bernstein double upgrades Argenx to "outperform," raises price target to €755

Investing.com -- Argenx (NASDAQ:ARGX) has been upgraded to an "outperform" rating from "underperform" by Bernstein, with the price target revised sharply upwards to €755 from €155, in a note dated Monday.

This shift reflects a reassessment of the company’s long-term growth prospects, particularly driven by the increasing commercial success of Vyvgart and the potential of empasiprubart, Argenx’s second most advanced drug candidate. The upgrade marks a significant shift in expectations for the company’s earnings and market position.

Bernstein’s revised forecast now anticipates group sales to more than double, exceeding $11 billion by 2030, a figure that is approximately 29% higher than Bloomberg consensus estimates.

Central to this outlook is Vyvgart, which is projected to become the fourth largest autoimmune drug in history. The new sales forecast assumes that 30,000 patients will be treated, representing a market share of approximately 6%.

One of the key drivers behind the upgrade is improved commercial execution in Vyvgart’s first two approved indications.

The biotech company has also initiated six additional Phase 3 trials, broadening the drug’s potential applications.

This expansion in clinical development has led Bernstein to adjust its earnings forecasts significantly, with estimated earnings per share for 2028-2034 now up to 41% ahead of market consensus.

The reassessment of Argenx’s growth prospects has also led Bernstein to rework its valuation model. The new price target incorporates a revised EV/EBITA valuation approach, now using projections for 2027-2029 rather than 2025-2027, better reflecting the company’s strong growth trajectory.

Additionally, a discounted cash flow model has been adjusted to account for long-term cash deployment, assuming the company will generate between $20 billion and $40 billion in cash through the 2030s.

The risk profile of Argenx’s stock is now considered to be strongly skewed to the upside. Bernstein’s bull-case scenario sees potential for a 138% increase in share price should both Vyvgart and empasiprubart achieve commercial success across all ongoing Phase 3 trials.

Even in a downside scenario where Vyvgart only generates revenue from its currently approved indications and empasiprubart does not reach the market, Bernstein projects a 27% drop in valuation, suggesting a favorable risk-reward balance.

Several factors contributed to this reassessment. Bernstein noted that market expectations may not be fully accounting for the company’s extensive Phase 3 pipeline, nor are they considering potential pricing dynamics.

Vyvgart’s second FDA-approved indication, CIDP (Chronic Inflammatory Demyelinating Polyneuropathy), has yielded higher pricing than initially anticipated, further bolstering revenue expectations.

Additionally, Bernstein’s analysis suggests that concerns over competition may be overstated, as their market share projections remain relatively conservative at an 8% blended market share across indications.

This upgrade comes after a period of volatility for Argenx. While Vyvgart’s launch in Myasthenia Gravis had been successful, the stock experienced setbacks in late 2023 due to the failure of a Phase 3 trial in Primary Immune Thrombocytopenia and the discontinuation of development for an autoimmune skin disorder.

However, the strong uptake of Vyvgart in CIDP, following its FDA approval in June 2024, has reinforced confidence in the drug’s market potential.

The rapid adoption of Vyvgart in CIDP, particularly among physicians already familiar with the drug in Myasthenia Gravis, has contributed to the revision of long-term earnings projections.

Despite the aggressive upward revision, Bernstein maintains that Argenx’s valuation remains reasonable.

The new price target implies a 4% premium relative to its biotech peers, a modest figure considering the company’s expected industry-leading growth. With multiple late-stage pipeline milestones ahead, further upgrades to market consensus estimates remain a possibility.