Vir Biotechnology Inc

VIR Details

Vir Biotechnology Inc (NASDAQ: VIR) is a commercial-stage immunology company. It emphasized combining immunologic insights with cutting-edge technologies to cure and avert serious infectious diseases.

Q2FY21 Result Performance (For the Period Ended 30 June 2021)

• Overall revenues increased to $177.1 million in Q2FY21 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.
• 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.
• The company witnessed 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 due to the impact of the recognition of revenue with respect to the license granted to GSK under the company’s 2021 GSK agreement.

Key Data (Source: Company Reports)

Recent Updates

• Received Marketing Approval in Australia: The company, in July 2021, 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 Risks

Failure to successfully roll out and commercialize sotrovimab would adversely hurt its business as well as its financial condition, results of operations, and growth prospects.

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.

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 enable the company to further 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 has been valued using an EV/Sales multiple-based illustrative relative valuation and has 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 the commencement of commercial sales of its first commercial product, sotrovimab.

For the purposes of relative valuation, peers like ImmunoGen Inc (IMGN.OQ), VBI Vaccines Inc (VBIV.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 $48.00 per share (09:40 am GMT-4, Eastern Daylight Time, USA) on 2^nd September 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.

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