On Wednesday, Scotiabank (TSX:BNS) adjusted its outlook on Apellis Pharmaceuticals (NASDAQ:APLS) shares, reducing the price target to $30.00 from the previous $35.00. Despite this change, the firm maintained its Sector Perform rating on the company's stock.
This decision came after Apellis reported financial figures that fell short of expectations, with total revenues reaching $196.8 million, which was $4.3 million below forecasts, and an earnings per share (EPS) deficit of $0.46, missing estimates by $0.17.
The pharmaceutical company's two main products, Syfovre and Empaveli, did not meet sales projections. Syfovre generated $152 million, falling short by $15.7 million, while Empaveli brought in $24.6 million, $8.4 million below expectations. According to Scotiabank, Syfovre's market launch may encounter challenges due to potential unfavorable gross-to-net adjustments.
Despite the revenue and EPS misses, not all indicators were negative for Apellis. The company saw an increase in commercial Syfovre vial shipments during the quarter, with a 7% quarter-over-quarter rise to 84,500 units. This suggests that patient uptake is continuing to grow.
Scotiabank anticipates that Syfovre will experience further revenue growth as it gains preferred status from payers. However, the firm also expects that a lower net selling price in the future will balance out the effects of increased patient demand.
Scotiabank has revised its sales forecast for Syfovre, now estimating $600 million in revenue for 2024, down from the previous forecast of $624 million. For 2025, the projection has been adjusted to $681 million from the earlier estimate of $769 million. These updated sales expectations reflect a more conservative view of the drug's growth trajectory. The new price target of $30 reflects these revised forecasts and the current market conditions surrounding Apellis Pharmaceuticals.
In other recent news, Apellis Pharmaceuticals reported third-quarter earnings with revenue and losses missing estimates. The company posted a Q3 loss of $0.46 per share, alongside a revenue of $196.83 million. Syfovre, one of Apellis's products, saw revenues decrease by about 2% to $152 million despite a 7% quarter-over-quarter growth in demand. This shortfall was attributed to higher gross-to-net adjustments and a general slowdown in the Geographic Atrophy market.
In response to these recent developments, various firms have adjusted their outlook on Apellis. Piper Sandler, Oppenheimer, H.C. Wainwright, and BofA Securities have revised their price targets to $32, $40, $57, and $47 respectively. However, all firms maintain a positive rating on the company's stock.
Despite the financial setbacks, Apellis has seen an uptick in its share of new prescriptions, reaching nearly 50%. Furthermore, a large Medicare Advantage plan has designated Syfovre as the exclusive preferred product on its formulary, starting January 1, 2025. These are recent developments that provide insight into the company's current financial situation.
InvestingPro Insights
To complement Scotiabank's analysis, InvestingPro data provides additional context on Apellis Pharmaceuticals' financial position. Despite the recent challenges, the company has shown impressive revenue growth, with a 162.1% increase in the last twelve months as of Q3 2024. This aligns with the InvestingPro Tip that analysts anticipate sales growth in the current year, supporting the potential for Syfovre's continued market penetration.
However, profitability remains a concern. The company's operating income margin stands at -49.8%, and an InvestingPro Tip indicates that analysts do not anticipate the company will be profitable this year. This corroborates Scotiabank's cautious stance and reduced price target.
On a positive note, Apellis operates with a moderate level of debt, and its liquid assets exceed short-term obligations, providing some financial flexibility as it navigates market challenges. The current market cap of $3.42 billion and a price-to-book ratio of 14.42 suggest that investors are still pricing in significant growth expectations, despite recent setbacks.
For investors seeking a more comprehensive analysis, InvestingPro offers 7 additional tips for Apellis Pharmaceuticals, providing deeper insights into the company's financial health and market position.
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