Post Bariatric Hypoglycemia Setbacks Will Pressure Earnings Before Long Term Endocrine Potential Emerges

Catalysts

About Amylyx Pharmaceuticals

Amylyx Pharmaceuticals is a biopharmaceutical company focused on treatments for endocrine conditions such as post bariatric hypoglycemia and neurodegenerative diseases including ALS and Wolfram syndrome.

What are the underlying business or industry changes driving this perspective?

• Although avexitide is positioned as a potential first approved therapy in a defined PBH population of about 160,000 people in the U.S., any setback in the Phase III LUCIDITY readout or delay in NDA review could push out the timing of potential product revenue and extend the period of reliance on the current cash balance of US$317 million.
• While awareness of PBH is increasing through inclusion on endocrinology board exams and a potential ICD 10 code, uptake of a new GLP 1 antagonist could still be constrained if physicians continue to rely on existing nutrition based management. This would limit the ramp and scale of any future PBH revenue contribution.
• Although Amylyx is building commercial and medical infrastructure ahead of a possible avexitide launch, the cost of expanding these teams and executing disease education and market access initiatives could compress net margins if prescription volumes or pricing do not quickly offset higher selling, general and administrative expenses.
• While the company has extended its cash runway into 2028 and reduced total operating expenses to US$36.6 million in the latest quarter, ongoing R&D spend on avexitide, AMX0318, AMX0114 and AMX0035, including milestone payments such as the US$4 million to Gubra, may keep earnings under pressure if none of these programs reach late stage value inflection in the expected time frame.
• Although long term investment in GLP 1 receptor antagonists and ALS therapies taps into areas of sustained medical need, the early stage profile of AMX0318 and AMX0114 means that setbacks in clinical development, safety findings or slower than expected progression to pivotal trials could limit diversification of future revenue streams beyond any single product.

Assumptions

How have these above catalysts been quantified?

• This narrative explores a more pessimistic perspective on Amylyx Pharmaceuticals compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• Amylyx Pharmaceuticals currently has no revenue. The bearish analysts are forecasting revenue to reach $78.0 million by August 2029.
• The bearish analysts are not forecasting that Amylyx Pharmaceuticals will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Amylyx Pharmaceuticals's profit margin will increase from 0.0% to the average US Pharmaceuticals industry of 21.9% in 3 years.
• If Amylyx Pharmaceuticals's profit margin were to converge on the industry average, you could expect earnings to reach $17.1 million (and earnings per share of $0.15) by about August 2029, up from -$152.1 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $50.4 million in earnings, and the most bearish expecting $-259.9 million.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 189.7x on those 2029 earnings, up from -28.3x today. This future PE is greater than the current PE for the US Pharmaceuticals industry at 16.5x.
• The bearish analysts expect the number of shares outstanding to grow by 1.46% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.24%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• Avexitide is still in the pivotal Phase III LUCIDITY trial and any failure to achieve statistically meaningful reductions in Level 2 and Level 3 hypoglycemic events, or regulatory feedback that the data set is not sufficient for approval, could delay or prevent avexitide from reaching the PBH market, directly affecting future revenue and earnings.
• Amylyx is ramping medical affairs and commercial infrastructure well ahead of any potential avexitide approval. If future PBH prescribing remains concentrated on nutrition based management or off label options like acarbose, utilization could fall short of the estimated 160,000 patient opportunity, which would put pressure on revenue growth and net margins as fixed SG&A costs rise.
• The company is funding multiple programs in parallel, including AMX0318, AMX0114 and AMX0035, while reporting quarterly operating expenses of US$36.6 million and planning additional R&D outlays such as the US$4 million milestone to Gubra. Any clinical setbacks, slower trial progress or changes in regulatory expectations could extend the period of losses and weigh on earnings.
• Long term GLP 1 antagonist development assumes continued recognition of PBH and related conditions as meaningful endocrine disorders. If future epidemiology work revises the addressable PBH population materially below the current 160,000 estimate, or if payers and health systems limit access despite an ICD 10 code or board exam inclusion, the revenue opportunity could be smaller than implied and constrain both revenue and operating leverage.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The assumed bearish price target for Amylyx Pharmaceuticals is $22.63, which represents up to two standard deviations below the consensus price target of $42.18. This valuation is based on what can be assumed as the expectations of Amylyx Pharmaceuticals's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $55.0, and the most bearish reporting a price target of just $20.0.
• In order for you to agree with the more bearish analyst cohort, you'd need to believe that by 2029, revenues will be $78.0 million, earnings will come to $17.1 million, and it would be trading on a PE ratio of 189.7x, assuming you use a discount rate of 7.2%.
• Given the current share price of $38.6, the analyst price target of $22.63 is 70.6% lower. Despite analysts expecting the underlying business to improve, they seem to believe the market's expectations are too high.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.