Legend Biotech(LEGN) BOCOM International·2024-08-12 07:47Investment Rating - The report maintains a Buy rating for Legend Biotech (LEGN US) with a target price of $76.00, representing a potential upside of 33.5% [1][5] Core View - The report highlights that the current stock price does not fully reflect the global commercialization potential of Carvykti in multiple myeloma (MM) treatment lines [1] - Legend Biotech's 2Q24 performance exceeded expectations, leading to an upward revision of the 2024 financial forecasts and target price [1] - The company is expected to achieve breakeven by 2026, driven by strong revenue growth and improving cost efficiency [1] Financial Performance - 2Q24 Revenue: Total revenue increased by 154% YoY to $187 million, with product revenue at $93 million and licensing revenue at $91 million [1] - Gross Margin: Product gross margin exceeded 50% for the first time, reaching 51.4% [1] - Net Loss: 2Q24 net loss narrowed significantly to $18 million (2Q23: $199 million), at the lower end of the loss guidance range [1] - 2024 Forecast: Revenue and net profit forecasts for 2024 are revised to $630 million and -$264 million, respectively [1] Carvykti Sales and Capacity Expansion - Carvykti Sales: 2Q24 sales grew 60% YoY and 18% QoQ to $186 million [1] - Hospital Coverage: The number of US hospitals offering Carvykti treatment increased to 77 (from 71 in 1Q24), with a target of 100 by year-end [1] - Outpatient Treatment: The proportion of outpatient treatment reached 45% (up from 35% in 1Q24) [1] - Capacity Expansion: Key capacity expansions include: - Novartis initiated clinical production in July, releasing additional commercial capacity in New Jersey [1] - Belgium Phase 1 capacity expected to be approved in 2H24, with Phase 2 and New Jersey expansions set for 2025 [1] - Out-of-stock (OOS) rates for 2-4L MM indications decreased slightly in 2Q24, with further reductions of 5-10% expected, improving production efficiency and gross margins [1] Financial Model Updates - Revenue Forecasts: 2024E revenue revised to $630 million (up 5.0% from previous forecast), with 2025E and 2026E forecasts unchanged at $1,051 million and $1,382 million, respectively [2] - Gross Profit: 2024E gross profit revised to $360 million (up 7.3%), with 2025E and 2026E forecasts at $604 million and $849 million, respectively [2] - Net Profit: 2024E net loss revised to -$264 million (from -$366 million), with 2026E net profit forecast at $78 million [2] Valuation and DCF Model - DCF Model: The DCF model's starting year rolled forward to 2025, with a target price of $76.00 [1] - Free Cash Flow: Free cash flow is projected to turn positive in 2025, reaching $334 million, and growing to $1,419 million by 2033 [3] - Enterprise Value: Estimated at $12,475 million, with equity value of $13,853 million and a per-share value of $76.00 [4] Industry Comparison - Legend Biotech is part of the Biotech sub-sector, with a Buy rating and a 33.5% potential upside [5] - Other notable companies in the Biotech sub-sector include BeiGene (6160 HK) with a 41.9% potential upside and Hutchmed (13 HK) with a 29.7% potential upside [5]