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Investing.com -- Bernstein analysts have downgraded Genmab A/S (CSE:GMAB) to an "underperform" rating from "market perform,” in a note dated Tuesday.
Shares of the Danish biotechnology company were down 2.1% at 05:18 ET (09:18 GMT).
This decision reflects concerns about the company’s future prospects, particularly regarding the anticipated loss of exclusivity for Darzalex, a key drug for treating blood cancer.
The downgrade is also influenced by recent disappointing news regarding Genmab’s ’Hexabody’ pipeline.
Bernstein’s analysis suggests that the current share price does not fully account for the expected revenue decline following Darzalex’s LOE.
The brokerage projects a three-fold drop in Genmab’s group revenues between 2030 and 2040.
Even in a bullish scenario, where all three of Genmab’s growth drivers (Epkinly, acasunlimab, and Rina-S) meet their peak sales targets, Bernstein analysts believe the share price still faces potential downside.
Additionally, they express doubt about Genmab’s capacity for mergers and acquisitions to counteract the patent cliff’s impact.
Bernstein has set a new price target of DKK 1,000 for Genmab, a significant reduction from the previous target of DKK 1,580. This target implies a 47% discount to global biotech peers, reflecting the anticipated earnings regression from 2028 to 2031.
The analysts have also revised their EPS estimates for 2025-2029, lowering them by up to 15%.
These new estimates are up to 19% lower than Bloomberg consensus forecasts, primarily due to profitability concerns.
While Bernstein’s total revenue forecasts are higher than consensus between 2028 and 2033, this is attributed to higher royalty expectations.
Bernstein analysts point out several factors that could alter their assessment. If Genmab successfully achieves peak sales targets for its three growth drivers, their DCF valuation would rise.
However, failure to commercialize acasunlimab and Rina-S, along with a lack of contribution from Epkinly in major treatment segments, could lead to a substantial decline in their DCF valuation.
Regarding potential M&A activity, Bernstein analysts are skeptical. While a takeover is theoretically possible, they believe large-cap pharma suitors might be wary of losing Genmab’s scientists, who often prefer the culture of biotech companies.
Additionally, despite the ProFound Bio acquisition, Bernstein analysts remain concerned about Genmab’s ability to offset the Darzalex patent cliff through M&A.
They calculate that a significant acquisition would be needed to maintain revenue levels, a challenging prospect given Genmab’s projected financial capacity.