The biotech sector is notoriously volatile, populated with plenty of unprofitable companies that soar on optimism about clinical trials. Those same stocks can later plummet on poor trial results, or a delay when it comes to regulatory approval.
Amylyx Pharmaceuticals Inc. NASDAQ: AMLX fits the profile of a young, volatile pharmaceutical, except for one thing: It reported its first profitable quarter, and analysts expect the company to be in the black this year and next, earning $0.77 a share this year and $5.36 per share in 2024.
Cambridge, Massachusetts-based Amylyx focuses on therapies for neurodegenerative diseases, including Alzheimer's and amyotrophic lateral sclerosis (ALS). The latter is more commonly known as Lou Gehrig’s disease.
Amylyx has already commercialized Relyvrio to treat ALS. Relyvrio is a combination of two small molecules that target nerve cell damage and loss. The company is also developing other drugs that target underlying causes of neurodegeneration.
Relyvrio was OK’d for treatment of ALS in adults in September, as the first treatment for ALS that showed significant slowing in patients’ decline, disease progression, and extended life expectancy.
Journey To Commercialization
But Amylyx stock shows what can happen during the often long journey through clinical trials and FDA approval. The stock fell 61% in March 2022, after an FDA advisory committee rejected the company’s application for approval. It plunged a further 30% in April 2022. All this occurred not long after Amylyx went public, in January of last year.
The company kept plugging away, developing new analyses. It resubmitted its application and got the nod in September. The delay actually helped, giving the company time to ramp up for a possible launch. In the fourth quarter of last year, sales were $21.9 million, as the company began selling Relyvrio in October, shortly after getting approval.
Also in October, the company raised $230.6 million in additional funding through a public offering of additional common shares.
Amylyx’s pipeline includes clinical trials for Relyvrio for use in treating other conditions, including Alzheimer’s. It’s also developing other drugs not yet in the clinical trial phase.
First-Quarter Profit
The company’s first-quarter results, reported on May 11, revealed $71.4 million in net product revenue, leading to a profit of $0.02 a share. That compared with a loss of $0.93 per share for the same period in 2022.
In the earnings conference call, co-CEO Justin Klee noted that just two quarters into the product’s launch, “over 10% of the approximately 29,000 people living with ALS in the U.S., are now on Relyvrio.”
Amylyx stock falls squarely into the growth category. It’s categorized as an emerging company under the federal JOBS Act of 2021. A company can retain that status for five years after its IPO, during which time it’s exempt from certain reporting requirements.
As you might imagine, it’s also not a dividend payer, which is common in the high-growth biotech industry. In filings, the company said, “We do not anticipate paying any cash dividends on our capital stock in the foreseeable future. Accordingly, stockholders must rely on capital appreciation, if any, for any return on their investment …. We currently plan to retain all of our future earnings, if any, to finance the operation, development and growth of our business.”
It also has no debt, having financed early phases of growth through venture capital, also a common practice in the biotech world.
More Buying Than Selling
With a market capitalization of $1.846 billion, Amylyx is too small to have caught on with many institutional investors, and small biotechs tend to inhabit a very speculative space, in any event. However, Amylyx institutional ownership data show a healthy ratio of buyers to sellers, with 83 institutional buyers scooping up $488.92 million in shares in the past 12 months, versus 26 institutional sellers unloading $91.22 million.
The Amylyx chart shows that the stock is not yet buyable, as it’s continuing to correct below a late January high of $41.93. The stock doesn’t necessarily have to clear that price before offering a buy opportunity, but watch for it to begin forming the right side of the current consolidation.
The pivot to profitability didn’t give Amylyx stock an upside boost, but future rounds of clinical trial data could provide that nudge, as could future results that beat expectations. For now, the stock remains a solid watch list candidate, as it’s proven that it can ramp up sales quickly.
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