On Thursday, Morgan Stanley (NYSE:MS) initiated coverage on Apellis Pharmaceuticals (NASDAQ: NASDAQ:APLS), assigning the stock an Equalweight rating with a price target of $31.00. The firm's analysis is based on insights from over two dozen experts regarding the market development and competitive landscape for Geographic Atrophy (GA) therapies.
Apellis Pharmaceuticals, which has launched its GA treatment Syfovre, is expected to see a run-rate of over $600 million in revenue approximately two years post-launch. However, the growth pace in the GA market is anticipated to decelerate.
Current estimates suggest that Syfovre and its competitor Izervay, developed by Astellas Pharma, have reached only 7-8% of the total U.S. GA population. Discussions with experts reveal that early adopters are treating about 10-20% of their eligible GA patients with complement inhibitors, a class of drugs that includes Syfovre.
The feedback from experts highlighted that while these drugs are approved, the benefits for patients are challenging to demonstrate and confirm in real-world scenarios. The expectation is that the GA market will be roughly divided between Syfovre and Izervay in the medium term, which will likely result in a slower growth trajectory for Syfovre into 2025, with projections of low to mid-teens growth compared to a potential doubling of sales in 2024.
Morgan Stanley's conservative forecast for peak Syfovre sales stands at $1.38 billion, taking into account only the U.S. market, as the European Union opportunity appears to be out of reach currently. The firm notes that the penetration rate of first-generation complement inhibitors among GA patients is still a subject of debate. The firm suggests that increased clarity on the addressable market size could lead to adjustments in their peak sales projections for Syfovre.
InvestingPro Insights
InvestingPro data and tips offer additional context to Morgan Stanley's analysis of Apellis Pharmaceuticals (NASDAQ: APLS). The company's market cap stands at $3.42 billion, reflecting its position in the biotechnology sector. Despite Morgan Stanley's projected revenue run-rate of over $600 million for Syfovre in two years, it's worth noting that APLS's current revenue for the last twelve months is $715.22 million, with an impressive revenue growth of 162.1% over the same period.
An InvestingPro Tip indicates that analysts anticipate sales growth in the current year, aligning with Morgan Stanley's expectations for Syfovre's market expansion. However, another tip reveals that APLS is not profitable over the last twelve months, which is consistent with the article's discussion of the challenges in demonstrating real-world benefits of GA treatments.
The company's Price to Book ratio of 14.42 suggests a high valuation relative to its book value, which could be attributed to investor expectations for future growth in the GA market. This high valuation multiples should be considered in light of Morgan Stanley's conservative peak sales forecast for Syfovre.
For investors seeking a more comprehensive analysis, InvestingPro offers 5 additional tips that could provide further insights into APLS's financial health and market position.
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