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We believe that uniQure stock (NASDAQ: QURE), a gene therapy company, is a good buying opportunity at the present time. QURE stock trades near $30 currently and it is, in fact, down 53% from its pre-Covid high of $65 in February 2020 – just before the coronavirus pandemic hit the world. QURE stock has declined 26% since its March 2020 levels of $41, compared to 76% gains for S&P 500. The underperformance can primarily be attributed to its Hemophilia B gene therapy clinical trials being put on hold by the U.S. FDA in December 2020. While the stock tried to recover over the next few months, a lower than estimated Q4 performance resulted in a further correction.
The 54% rise over the last two years is justified given the strong fundamentals of the company. uniQure’s revenues have grown 186% from $13.1 million in 2017 to $37.5 million in 2020. Note that the company does not have any commercial product yet, and its revenues are garnered from licensing and collaboration with other pharmaceutical companies. The company has issued more shares over the recent years, resulting in a large 65% growth in total shares outstanding. This adversely impacted the revenue-per-share, which grew only 74% (compared to 186% revenue growth) to $0.84 in 2020, compared to $0.49 in 2017. Despite the strong performance over the recent years, the company’s P/S multiple has contracted. uniQure’s P/S multiple expanded from 40x in 2017 to 43x in 2020, before dropping to 36x currently. Our dashboard, ‘What Factors Drove 54% Change In uniQure Stock between 2017 and now?‘, has the underlying numbers.
So what’s the likely trigger and timing for upside?
Stock Prices
Now, uniQure yesterday stated that an investigation clears Hemophilia B gene therapy of causing liver cancer in a patient, which led to the FDA putting the trial on hold back in December 2020. This is a positive development for the company. The Hemophilia B gene therapy alone can see peak sales of $1.2 billion if approved, while Huntington’s disease treatment can see peak sales of over $2 billion. We believe that both the Hemophilia B and Huntington’s Disease treatment being developed by the company looks promising, and QURE stock after the recent correction, looks attractive at the current valuation. For perspective, the consensus price estimate of QURE currently stands at $68, which is a massive 2.2x higher from the levels the stock is trading at currently.
We see that the company’s P/S ratio is high currently, which is common for pharmaceutical companies with promising candidates in clinical trials, and as the company grows, the multiple is likely to come down. That said, a decline in P/S ratio will be more than offset by growth in RPS, given the expected surge in revenues, and thereby resulting in much higher levels for QURE stock.
While QURE stock may see higher levels, 2020 has created many pricing discontinuities which can offer attractive trading opportunities. For example, you’ll be surprised how counter-intuitive the stock valuation is for UnitedHealth vs Ingevity.
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