Is Replimune Stock a Buy?

Replimune Group Inc (NASDAQ:REPL) is a biotechnology company working on a new class of oncolytic immunotherapies targeting various forms of cancer and more.

It’s in late-stage clinical trials for IGNYTE, its melanoma treatment that could be a potential breakthrough if fully approved. And that’s just one drug in the company’s arsenal.

For investors the rewards are potentially sky high, so is Replimune stock a Buy?

These pioneering cancer treatments ignite a patient immune response both at the site of the injected tumor and throughout the body. This helps you not only recover from cancer, but you can also potentially be vaccinated against any future relapse.

Melanoma only accounts for one percent of overall skin cancers, but it causes a large majority of skin cancer deaths, according to the American Cancer Society. Over 106,000 people are expected to be diagnosed with a new melanoma in 2021, and over 7,000 people are estimated to die from the disease this year.

Treating this form of cancer is a necessary step toward human longevity, and that’s just one form of cancer. Cancer is second only to heart disease as the leading cause of death in humans, with an estimated 600,000 people dying each year from the deadly illness.

Any potential treatment is a lifesaver, and that could lead to huge benefits for investors. 

Replimune Cancer Therapies A Game Changer?

Replimune Group is a Woburn, Massachusetts biotechnology company working on cancer treatments. It was founded in 2015 and in a short time gained partnerships with companies like Regeneron (REGN) and Bristol-Myers Squibb (BMY) to codevelop its initial treatments and prove efficacy.

This emerging class of cancer therapeutics attacks cancerous cells within a tumor in much the same way vaccines work.

Its proprietary Immulytic platform is used to produce a potent proprietary strain of the herpes simplex virus (HSV) that acts as the base. Then they deliver fusogenic proteins that activate your body’s natural immune system to drain lymph nodes and tumors

These treatments are meant to both directly kill the tumor and immunize your entire body against their resurgence. The genetically engineered HSV is the backbone of four treatments in its pipeline undergoing clinical trials against MSI-H, NSCLC, and CSCC cancers, along with solid tumors. Any one of these treatments could ignite sizeable revenue streams should they prove safe and effective.

So, should you buy Replimune stock?

Is Replimune Stock A Buy?

Replimune Group has a consensus Buy rating based on eight analyst recommendations. The positive sentiment stems from expectations that the company will have a prepared and approved treatment for the market by year end. Of course, that assumes key milestone targets are met.

Companies like REPL often trip on an FDA hurdle before they can reach profitability, and by that time, another company may beat it to the punch.

Nevertheless, the company is already preparing for commercialization and held a virtual investor event in early June to revive investor interest. The company’s market capitalization peaked in October 2020 as its treatment advanced to the next stage, but it’s been on a slow decline since.

That could present a discounted opportunity for those looking to buy the dip.

Replimune Financial Forecasts

It’s near impossible to forecast Replimune’s earnings when it has a commercially viable product. But until that time the earnings should continue to stay steadily in the red. The expectation is obviously that EPS flips positive into the green.

The company holds approximately $476 million in cash that capitalizes it through the second half of 2024. It needs to complete clinical trials for at least one treatment by then to begin generating revenue, and it has revenue-share agreements in place.

The company lost about -$56 million in the fiscal year 2020 and another -$80 million in the fiscal year 2021. This is because it has high operating expenses to pay for clinical trials and all the necessary equipment.

The loss to shareholders is in the mid $1.00-$2.00 range each year until then. Expect the company to continue spending money with no revenues until it reaches FDA approval. If its melanoma therapy is approved, it will be part of the $2.98 billion industry expected to grow to $6.21 billion by 2025.

It’s unclear how much of that market the company will own; it still needs to do a lot of work on the distribution side of the business after FDA approval. That highlights the risks.

Replimune Regulatory Hurdles Pose Risk

Like any biotechnology company, Replimune is in clinical stage until it can pass through the regulatory hurdles. Until then, it’s involved in a very expensive business that has no revenue potential. If it can’t prove efficacy, it can’t commercialize its immunotherapies.

That’s the risk with any biotechnology company, and even if it’s approved, each treatment within its pipeline still has hefty costs. It will need a handful of them to hit the market before it can sustainably make a profit for investors.

That makes it hard to value the company.

Is Replimune Valuation Fair?

Replimune is a $1.5 billion company with no revenue. It’s difficult to assess whether the company is undervalued. If future cash flow projections come to fruition, REPL has the potential to pop all the way to $57 per share.

Until then, everything is just a guess. Certainly, these treatments have a huge market potential if proven viable given that cancer is a leading cause of death and hence the market opportunity is enormous. Of course, it’s not alone in racing toward different treatment options, and that could bottleneck demand.

Is Replimune Stock a Buy? The Bottom Line

Replimune has a lot of potential to treat melanomas and other cancerous tumors. If it’s proven effective, it can revolutionize the industry and help prevent one of the leading causes of death. But that’s only if it’s proven effective.

Until then, it’s a clinical-stage company worth over $1 billion with no commercially viable product. It could be years before final approval is granted, and a decade or longer before its pipeline earns enough to give back to investors. Be careful.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.