Wolfe Research Upgrades argenx SE (ARGX) to Outperform

Wolfe Research analyst Andy Chen upgraded argenx SE (NASDAQ: ARGX) from Peerperform to Outperform, PT $697.00.

The analyst comments "Stock drivers. Admittedly, now through 2025, there will be few exciting catalysts in favor of ARGX — aside from myositis and PFS, but those in and of themselves are huge. External threats are also becoming tamer. Not only are MG earnings seemingly inflecting upwards, we predict that after Biohaven and Immunovant updates, folks will have higher confidence in argenx's dominant status in MG (we predict Immunovant's batoclimab would succeed but proceed to not launch). We foresee positive earnings results from argenx (due partially to MG and PFS) to drive the stock in 2025, esp given the company's consistent history of beating revenue (Exhibit 1), which is somewhat correlated to stock movement (Exhibit 2). In addition, ARGX is also structurally changing, with operating margin trending positive. 2025 is expected to be the first year of profitability — we model EBIT figures of ($112M), $450M, $1.1B over 2024-26. In 2026-28, we model 31%, 40%, 49% operating margin, comparing well versus the similar-cap similarly-trended ALNY at 4%, 15%, 50%. Further comparing vs ALNY (downgraded to Underperform), it'd be much easier for ARGX to achieve R&D & commercial synergies due to 'pipeline in a product' features across multiple molecules. ALNY cannot easily do the same (due to high-Medicare and the IRA). Overall, we expect increasing operating margin of ARGX to correlate with upward trending liquidity (Exhibit 3) & investability & and thus growing participation of long-only investors. Empirically, positive-turning margin has historically buoyed several biotechs: HZNP (2014-15), CELG (2004-05; Exhibit 4), REGN (2012-13, not covered) and VRTX (2016-18; Exhibit 5). We revise revenue up significantly in MG due to strong execution and less competition ($5.1B US peak), likely above Street peak (~$3.5B?). Our view on CIDP still somewhat bearish ($1.2B US peak). In addition to ITP, three indications we like around the corner, Sjogren's, DM, TED at $2.0B, $1.4B and $400M adjusted, respectively. Everything combined including ex-US, we are at ~$12B global Vyvgart peak in 2037E. This is a Dupixent-calibre megablockbuster in the making. In DCF models, most biotechs deserve zero terminal values, but ARGX is uniquely different (we assign 0% terminal growth). Vyvgart R&D is quite similar to empa, the IgA degrader and next-gen FcRn; the likelihood of pipeline R&D success is higher with argenx, and sooner or later additional value would be unlocked. Sitting across both benefit designs is advantageous, and it will be far easier for medical benefit drugs to defend against biosimilars especially if the company also owns other high-volume drugs (refer to Remicade's biosimilar defense from J&J). Upgrade to Outperform on an easier 2025, long-term revenue potential, and conversion to profitability, PT $697."

For an analyst ratings summary and ratings history on argenx SE click here. For more ratings news on argenx SE click here.

Shares of argenx SE closed at $596.00 yesterday.

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