Vir Biotechnology, Inc.

VIR Details

Vir Biotechnology, Inc. (NASDAQ: VIR) is a clinical-stage immunology company dedicated to combining immunologic insights with cutting-edge technologies to treat and prevent serious infectious diseases.

Result Performance – For the Second Quarter Ended 30 June 2021 (Q2FY21)

• Total revenues grew to $177.1 million in Q2FY21 from $67.0 million in the pcp. Contract revenue increased phenomenally 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.
• The cost of revenue increased to $1.1 million in Q2FY21 due to third-party royalties owed based on the sales of sotrovimab, which received a EUA in May 2021.
• The company witnessed a turnaround in net income that stood at $61.8 million in Q2FY21 compared to a net loss of $31.2 million in the pcp. The net income in Q2FY21 was due to the impact of the recognition of revenue for the license granted to GSK under the company’s 2021 GSK agreement.

Key Data (Source: Company Reports) 

Recent Update

As per the release dated 23 August 2021, the company established the first marketing authorization, granted in Australia, for sotrovimab, developed in partnership with GlaxoSmithKline (GSK). Following this, GSK Australia announced that the Australian Therapeutic Goods Administration (TGA) has approved provisional marketing authorization for sotrovimab (under the brand name, Xevudy)

Risks

The company has been incurring significant net losses since its inception. Although it has recently started to recognize revenue for sotrovimab products, 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, the company with GSK is currently assessing potential timelines for proceeding with VIR-2482 and other influenza therapies as part of their expanded agreement.

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 moreover enable the company to further progress its R&D work.

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

Stock Recommendation:

The stock is currently trading below the average 52-week high price of $141.01 and 52-week low price of $25.31.

The stock has been valued using an EV/Sales multiple based illustrative relative valuation method and arrived at a target price which reflects a decline of low double-digit (in percentage terms). The company might trade at a slight discount to its peers’ average, considering a decrease in current ratio at 5.91x in Q2FY21 versus an industry median of 7.42x and a fall in gross margin at 99.4% in Q2FY21 versus 99.6% in Q1FY21.

Considering the aforesaid facts, volatile markets, and current trading levels, we suggest investors to book profit on the stock. Hence, we give a “Sell” rating on the stock at the current price of $51.02 per share, as of 21^st September 2021.

Technical Analysis:

Daily Price Chart

Source: REFINITIV 

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.

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