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Amylyx’s Strong Quarterly Earnings Indicate Promising Further Growth

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Summary :

  • Amylyx Pharmaceuticals, Inc. (AMLX) is a biopharmaceutical company that is primarily concerned with the creation of novel treatments for neurodegenerative diseases.
  • The company has just delivered strong quarterly results beating analyst expectations on all fronts.
  • All attempts to promote the company’s base drug have been successful and considering the anticipated drug approvals in Europe , additional testing measures indicate increase in the run rate & the revenue
  • I rate the company as a buy also that the company is fair close to being breakeven in upcoming quarter.

What does the company do ?

Joshua Cohen, Justin Klee, and Patrick Yeramian founded the Cambridge, Massachusetts-based company in 2013.The company is focused on developing treatments for a variety of neurodegenerative diseases, such as Alzheimer’s disease, Parkinson’s disease, and ALS, and it has operations in the United States, Europe, and Asia. AMX0035 is the company’s lead product candidate. In addition to AMX0035, the company is developing other neurodegenerative disease treatments, including AMX0065 for Alzheimer’s disease.

Strong Earnings

The financial results for the quarter for Amylyx are quite impressive. The company’s normalised earnings per share (EPS) was -$0.65, which was $0.19 greater than what analysts had predicted, indicating a positive earnings surprise. Additionally, the company’s GAAP actual EPS of -$0.65 beat forecasts by $0.16, pointing to a strong bottom line for the quarter. The company’s revenue for the quarter came in at $21.89 million, significantly exceeding expectations by $17.16 million. The net loss for the quarter was $42.7 million, compared to $28.3 million in 2021. However, the company ended the year with $346.9 million in cash and short-term investments and no debt. I believe the company’s recent quarterly earnings have been strong meeting expectations and indicate a positive trajectory for future growth. Additionally, the management commentary indicates the possibility of the company becoming break even in the next quarter of launch.

Successful drug launch & growth prospects given high demand

The company discussed on launch of new U.S drug with prime focus around three main goals: educating patients and clinicians about RELYVRIO, engaging with payers to ensure access to eligible patients, and ensuring positive interactions between patients and ALS clinics and Amylyx. Since the FDA’s approval in September 2022, Amylyx’s efforts to promote RELYVRIO have been successful. RELYVRIO, the company’s ALS treatment, has been in high demand within the ALS community.

However the company expects as much as 10,000 in the US to use their medication from the 29,000 people affected by ALS. The rest of management commentary follows regulatory updates in Europe , phoenix study , research on other novel drug and collaboration with Washington university along with Karen Firestone joining the board of directors. It is evident from the management commentary the Phoenix trial, additional personnel costs, commercial launch & infrastructure build costs are causing the increase in R&D , SG&A expenses which have rose to $22.8 million and $40.8 million respectively for the quarter. I believe the successful launch of a new drug and anticipated approvals in Europe in the coming months further strengthens the company’s potential for continued success alongside appointment of director which brings in fresh perspectives and improving the leadership team. Hence, I rate the stock as a buy.

As we can see in the above chart, the stock has exhibited a rangebound movement over the past six months. The current upbeat earnings have given the stock a breakout from its range and this uptrend is likely to continue with the stock potentially reaching $42 i.e. our target price. Moreover, the technical indicators, including the Donchain channel (50), strongly suggest that the stock may experience a rapid rally given the strong RSI of the stock. Therefore, we recommend that trend following investors take advantage of the current uptick and purchase the stock.

Conclusion

The company’s losses are a factor of increased spending on S&M, R&D . However , the strong management commentary suggest breakeven possibilities soon. Despite the company’s fwd EV to Sales ratio of 11.46 which is far higher then the sector median of 3.77, there are other factors which warrant a buy for this stock and making the company deserve a premium. I believe the company has solid prospects going forward which for now seem in the immediate near term right from its anticipated drug approvals, improved revenue forecasts and improved leadership which I believe calls for a rerating and a buy for the stock.

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