ROIV - Roivant Sciences: Is this Vivek Ramaswamy's biotech stock a buy?
2023-09-09 11:17:21 ET
Roivant Sciences (NASDAQ: ROIV) stock price has entered a major bull run as investors remain optimistic about the company’s future. The shares surged to a high of $12.67 on Friday, reaching its highest level since December 2021. It has roared back by more than 400% from the lowest level in 2022, bringing its market cap to over $9 billion.
Is Vivek Ramaswamy’s company a good buy?
Roivant Sciences is a biotech company that was established by Vivek Ramaswamy, the 38-year Republican presidential candidate. The company is working on several drugs meant to address several illnesses like psoriasis, atopic dermatitis, ulcerative colitis, and Chron’s disease.
Like other companies in the industry, its goal is to develop these drugs and either commercialize or sell them to larger companies. Most recently, the company is said to be in talks to sell its experimental ulcerative colitis and Chron’s disease to Roche. If the deal goes on, it will value these drugs at over $7 billion.
Roivant Sciences also has other drugs in phase 3 trials, raising the possibility that they will be approved by the FDA in the coming years. Japan’s Dainippon bought five of its drugs for $3 billion and a 10% stake in the company.
Most importantly, the company is growing its revenues. It reported a net product revenue of $16.7 million during the quarter, up from $13.7 million in the previous quarter.
Of course, these are tiny figures for a company that is valued at over $9 billion. But early-stage biotech companies are not valued using traditional metrics like PE and and PS ratios. Instead, investors value them via the lens of the future value of the drugs in the pipeline.
Most importantly, Roivant has a clean balance sheet, with over $1.6 billion in cash and short-term investments. The management believes that these resources will be enough to take it until the second half of 2025.
Therefore, I believe that Roivant Sciences stock’s risk/reward is mildly positive. However, it has some risks, especially Vivek Ramaswamy’s presidential ambitions. While Vivek resigned from the company, it is still associated with him. He still holds about 7% stake in the company.
Roivant Sciences stock price forecast
The daily chart shows that the Roivant Sciences share price has been in a strong bullish trend in the past few months. As a result, the shares remain above the 50-day and 25-day moving averages.
The stock has also formed an ascending channel shown in green. This price is a few points below the upper side of this channel. Therefore, the stock will likely continue rising as buyers target the key psychological level at $15. The stop-loss of this trade will be at $12.
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