2023-08-11 16:10:14 ET
Summary
- Amylyx Pharmaceuticals, focusing on ALS treatment, has shown significant financial growth with its product Relyvrio; seeking global expansion.
- Amylyx's impressive Q2 financial performance indicates profitability, negligible debt, and notable cash reserves, signifying promising future prospects.
- Updated investment recommendation for Amylyx is "Strong Buy", but investors should consider risks like the phase 3 PHOENIX trial outcome.
Introduction
Amylyx Pharmaceuticals ( AMLX ) is a biotech firm focused on neurodegenerative disorders. Its main product, Relyvrio, approved in the US and Canada for ALS treatment, is pursuing global expansion and pending confirmatory data.
In my previous analysis of Amylyx, I highlighted its strong Q1 2023 financial performance, with Relyvrio raking in $71.4 million, suggesting annual revenues might surpass $1 billion. While Relyvrio has demonstrated resilience, the FDA's recent decisions on other drugs indicate a more lenient approach to rare disease treatments, which could bode well for Relyvrio's future evaluations. Despite Amylyx's share price dip, I revised my investment rating from "Sell" to "Buy." I also noted that although the future looks promising, investors should brace for fluctuations and closely monitor upcoming 2024 data, while approaching this opportunity with caution.
The following article discusses Amylyx's focus on ALS treatments and its promising financial performance. Relyvrio, its primary product, shows potential, but uncertainties like the phase 3 PHOENIX trial and market dynamics suggest cautious optimism for investors.
Q2 2023 Earnings
Looking at Amylyx's most recent earnings report , for the second quarter ended June 30, 2023, net product revenue stood at $98.2 million, primarily from sales of Relyvrio in the U.S. and Albrioza in Canada, with associated cost of sales being $5.6 million. Notably, there were no such revenues or costs in Q2 2022. Research and development expenses increased to $29.0 million, up from $24.3 million in 2022, due to increased personnel costs and spending on AMX0035 for the Phase 3 ORION trial. Selling, general and administrative expenses surged to $43.4 million, a rise from 2022's $30.0 million, due to added personnel to support launch and commercialization. Despite these expenses, the net income was $22.1 million. Their cash and short-term investments totaled $357.3 million, a slight increase from $345.7 million in the previous quarter.
Liquidity & Balance Sheet
As of June 30, 2023 , Amylyx has cash and cash equivalents of $247.76M, and short-term investments amounting to $109.52M, leading to a combined total of $357.28M in highly liquid assets. Looking at the condensed consolidated statements of operations, the company reported an income from operations of $18.15M for the six months ended June 30, 2023. As this is positive, there isn't a cash burn to calculate a runway for. In terms of overall liquidity, the company has strong current assets of $427.39M against current liabilities of $64.08M, showcasing a robust liquidity position. The company doesn't have significant long-term debts, with its liabilities mainly consisting of accounts payable and accrued expenses. Amylyx's accumulated deficit decreased from December 31, 2022 to June 30, 2023, indicating that it's moving in a profitable direction. Hence, there doesn't seem to be an immediate need for additional financing, given the strong liquidity position and the fact that the company is now generating a positive operational income.
Valuation, Growth, & Momentum
According to Seeking Alpha data: Amylyx has a conservative capital structure with a market cap of $1.44B, minimal total debt, and a substantial cash reserve, which results in an enterprise value near $1B. From a valuation perspective, it trades at a forward P/E of 28.13, indicating a potential premium relative to its future earnings, and has an EV/Sales ratio of 11.78. The company showcases robust growth; its sales are expected to grow +1,646.43% in 2023, then by +60.79% in 2024, and +23.41% in 2025. Earnings per share [EPS] are projected to significantly increase from $0.59 in 2023 to $4.39 by 2025. However, stock momentum has been unfavorable, with Amylyx's stock declining by -28.60% in the last three months, underperforming the S&P 500.
Growth Initiatives
Amylyx's management provided an update on the growth of Relyvrio in the market during their recent earnings call . As of June 30, approximately 3,800 people in the U.S. were on Relyvrio. This rapid adoption is attributed to the company's educational efforts. Although prescribing is concentrated among just over 80 prescribers, mainly at major ALS centers, this group represents around half of all Relyvrio prescriptions. This concentration indicates substantial growth potential as the company aims to expand its reach.
By the end of Q2, about 75% of the top 500 U.S. prescribers and almost all key ALS centers had prescribed Relyvrio. The company's strategy focuses on increasing awareness and deepening penetration among these top prescribers. Outside of this group, there's an untapped growth opportunity as outreach expands.
Furthermore, the company is actively engaging with payers. By Q2's end, most U.S. insurers covering ALS had published favorable coverage policies for Relyvrio, a significant achievement just three quarters after launch.
Efforts are also in place to optimize the patient and clinic experience. The time between prescription and shipment of Relyvrio has reduced to an average of 25 days, with insurance coverage aiding this improvement.
In Canada, the drug, named Albrioza, has seen high interest, with five provinces announcing public reimbursement. Amylyx's ultimate goal is to make Relyvrio a foundational therapy for ALS.
My Analysis & Recommendation
Reflecting on Amylyx's trajectory, it's evident the company is at a crucial crossroads. Its transition to profitability, highlighted by its strong Q2 financial results, signals bright prospects. While the U.S. market acceptance of Relyvrio and Albrioza's growing presence in Canada are notable, the upcoming phase 3 PHOENIX trial in mid-2024 cannot be ignored. This trial has the potential to either reinforce Relyvrio's position in the ALS treatment field or introduce unexpected complications. However, considering the FDA's recent favorable stance on rare disease medications and Amylyx's persistent dedication to improving patient outcomes, there's cause for hope. With minimal debt and a substantial cash cushion, the company is well-equipped to face possible obstacles. With an enterprise value hovering around $1B and the drug's capacity to yield equivalent peak yearly revenues, the investment potential is evident. It seems the market might be undervaluing the PHOENIX trial's potential success, pricing in a minimal likelihood of favorable results. Given this blend of promising signs and inherent challenges, I'm revising my investment stance for Amylyx to a "Strong Buy." While the future holds promise, investors should stay alert and adapt to the constantly shifting landscape of the industry.
Risks to Thesis
When the facts change, I change my mind.
While I maintain my "Strong Buy" recommendation for Amylyx, I recognize several risks that investors should be aware of. First and foremost, the outcome of the phase 3 PHOENIX trial in 2024 remains uncertain. An unfavorable result could impact Relyvrio's standing in the ALS market, potentially undermining its projected revenue growth. Moreover, though the FDA has recently shown leniency towards rare disease treatments, there's no guarantee this trend will persist, which may pose regulatory challenges for Amylyx in the future. Additionally, while current financials are robust, the biotech sector is inherently volatile, and unforeseen R&D expenditures or external market shocks could alter the company's profitability trajectory. Lastly, rapid market traction also means the pressure is on for Amylyx to maintain supply chains, manage potential competition, and continually innovate. It's essential to weigh these risks against the potential rewards when considering any investment.
For further details see:
Amylyx Achieves Profitability On Wings Of Relyvrio (Rating Upgrade)