Vir Biotechnology Inc

VIR Details

VIR Details

Vir Biotechnology Inc (NASDAQ: VIR) is a commercial-stage immunology company. It emphasized on combining immunologic insights with cutting-edge technologies to cure and avert serious infectious diseases. The company follows a multi-program, multi-platform method in order to use the breakthroughs, including the development of treatments that induce protective and therapeutic immune responses.

Robust Performance in Q2FY21 (For the Period Ended 30 June 2021)

• Strong Growth in Revenue: The company reported solid growth in revenue in Q2FY21 with total revenues increased to $177.1 million from $67.0 million in the pcp. Contract revenue grew significantly during the quarter to $168.7 million from $43.5 million in Q2FY20 driven by $168.3 million from deferred revenue related to the license granted to GSK under the company’s 2021 GSK agreement.
• Cost of Revenue at $1.1 million: The company has incurred a cost of revenue of $1.1 million in Q2FY21 due to third-party royalties owed based on the sales of sotrovimab, which received a EUA in May 2021.
• A Turnaround in Net Earnings: Driven by the impact of the recognition of revenue with respect to the license granted to GSK under the Company’s 2021 GSK agreement has resulted in a turnaround in net income that rose to $61.8 million in Q2FY21 compared to a net loss of $31.2 million in the prior corresponding period.

Exhibit 1: Turnaround in Earnings in Q2FY21

Source: Analysis by Kalkine Group

Bagged First Marketing Approval for its Sotrovimab Product

Received Marketing Approval in Australia: The company, in July 2021, has received the first marketing approval in Australia from the Australian Therapeutic Goods Administration (TGA) for its first commercial product, Sotrovimab. This particular monoclonal antibody product was developed in collaboration with GlaxoSmithKline (GSK) to cure adults and adolescents with an age of 12 years and more and weight minimum of 40 kg those infected with COVID-19 and does not require initiation of oxygen and are at higher risk of progression to hospitalization or death.

Expecting More Regulatory Decisions Globally: Further, in a major boost towards commercialization, the Australian Government has agreed to purchase sotrovimab to address COVID-19. Moreover, the company is hoping for additional regulatory decisions around the world in the near future. It is also aiming at expanding its scope of work with its partner, GSK.

Entered an Agreement with the European Commission for Supply of Sotrovimab

VIR along with its partner GSK has recently formed a joint procurement agreement with the European Commission to deliver up to 220,000 doses of Sotrovimab. This particular agreement allows participating European Union (EU) Member States to rapidly acquire sotrovimab post the local emergency approval or authorization at the EU level to cure high-risk COVID-19 patients.

Key Metrics

VIR witnessed a robust growth in revenue in FY20 that translates into a strong CAGR of 204.3% over FY17-20. The revenue generation has increased to $76.37 million in FY20 from a mere $2.71 million in FY17. Further, the company saw sustained improvement in its current ratio from FY18 onwards. The company’s current ratio rose to 7.80x from 2.95x in FY18. The improvement in the current ratio indicates that the company possesses better capabilities to meet short-term obligations.

Exhibit 2: Key Financial Metrics

Source:  Analysis by Kalkine Group

Top 10 Shareholders: The top 10 shareholders together form 71.30% of the total shareholding while the top four constitute the maximum holding. Notably, SB Investment Advisers (UK) Limited and ARCH Venture Partners are holding a maximum stake in the company at 17.32% and 16.59%, respectively, as also highlighted in the chart below.

Exhibit 3: Top 10 Shareholders

Source: Analysis by Kalkine Group

Key Risks

The company has been incurring significant net losses since its inception. Although it has recently started to recognize revenue for sotrovimab product, however, the extent of future revenue remains uncertain. It depends on its single product sotrovimab. Failure to successfully roll out and commercialize sotrovimab would adversely hurt its business as well as its financial condition, results of operations, and growth prospect.

Outlook

Driven by the impact of the low rate of influenza during the COVID-19 pandemic along with the recent increase in COVID-19 cases due to variants, VIR along with GSK is currently assessing potential timelines for proceeding with VIR-2482 and other influenza therapies as part of their expanded agreement.

The company has experienced solid advancement across its extensive infectious disease portfolio in Q2FY21 and particularly the availability of its monoclonal antibody sotrovimab to treat patients infected with illness due to COVID-19 and are at high risk for hospitalization. With the authorization of Sotrovimab for emergency use, the company along with its partner GSK has set up supply agreements with multiple countries around the world. Further, plans are underway to apply for a Biologics License Application to the FDA later this year. With decent cash, cash equivalents and investments of around $876.7 million as of 30 June 2021 in place, this will further enable the company to progress its R&D work.

Valuation Methodology: EV/Sales Based Relative Valuation (Illustrative)

Technical Overview:

Chart:

Source: REFINITIV

Note: Purple Color Line Reflects RSI (14-Period)

Stock Recommendation

The stock rose by ~35.07% in 1 month. It has made a 52-week low and high of $25.31 and $141.01, respectively.

The stock has been valued using an EV/Sales multiple-based illustrative relative valuation and have arrived at a target price that reflects a rise of low double-digit (in % terms). A slight premium has been applied to EV/Sales Multiple (NTM) (Peer Average), considering the turnaround in earnings in Q2FY21, and commencement of sales of its first commercial product, sotrovimab.

For the purposes of relative valuation, peers like ABIOMED Inc (ABMD.OQ), Accelerate Diagnostics Inc (AXDX.OQ), among others have been considered.

Considering the aforementioned factors, and decent outlook and liquidity position, we give a “Buy” recommendation on the stock at the current market price of $49.83 per share, up by 3.75% on 24^th August 2021.

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decisions should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.

Technical Indicators Defined:-

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Disclaimer

References to ‘Kalkine’, ‘we’, ‘our’ and ‘us’ refer to Kalkine Limited.

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