ORIC Pharmaceuticals (ORIC) has put its prostate cancer program in the spotlight with fresh Phase 1b data for rinzimetostat plus darolutamide and a clear recommended Phase 3 dose now aligned with regulators.

The latest rinzimetostat update comes after a strong 1 year total shareholder return of 98.63%. The year to date share price return of 24.23% sits against a recent 30 day share price pullback of 14.71%, suggesting momentum has cooled in the short term even as longer term holders have still seen sizeable gains.

If this kind of oncology news has your attention, it could be a good moment to see what else is moving in cancer and biotech using our 31 healthcare AI stocks

With ORIC now a roughly $1.0b clinical stage player, a 1 year total return near 99% and an intrinsic value estimate implying a sizeable discount, you have to ask: is there still real upside here, or has the market already priced in future growth?

Preferred Price to Book of 2.7x: Is it justified?

ORIC shares last closed at $10.15 and the stock trades on a P/B of 2.7x, which screens as more expensive than the broader US Biotechs industry at 2.3x but cheaper than its direct peer group average of 39.2x.

The P/B ratio compares a company’s market value to its book value. For a clinical stage biotech like ORIC with no revenue and a net loss of $129.47m, investors are effectively paying 2.7x the accounting value of its net assets.

Given that ORIC is unprofitable, forecast to remain loss making over the next 3 years and earnings are expected to decline by an average of 3.2% per year, a premium to the broader industry suggests the market is assigning value to its pipeline and seasoned management team rather than current financial performance, while still pricing it well below the peer average multiple.

Compared to the US Biotechs industry P/B of 2.3x, ORIC’s 2.7x ratio is higher, implying investors are paying more per dollar of book value than the sector overall. However, the discount to the 39.2x peer average is very large and underlines how wide the range of valuations can be across comparable companies.

Result: Price-to-book of 2.7x (ABOUT RIGHT)

However, the story can change quickly if trial data underwhelms or funding needs rise, especially with no current revenue and an annual net loss of $129.47m.

Another view on value: DCF vs market price

While the recent P/B check suggested ORIC is priced about right around 2.7x, our DCF model points in a very different direction. On this view, ORIC at $10.15 is trading well below an estimated future cash flow value of $43.25, which implies a very large gap. This raises the question of whether this is a genuine mispricing or a reflection of the risks in an unprofitable, zero revenue biotech.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out ORIC Pharmaceuticals for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 57 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Next Steps

With sentiment clearly mixed, and both upside potential and real risks in play, it makes sense to review the data now and decide where you stand using the 1 key reward and 5 important warning signs.

Looking for more investment ideas?

If ORIC has sharpened your focus, do not stop here. Broaden your watchlist with a few targeted idea lists that could surface your next opportunity.

• Target reliable income by scanning for companies paying robust yields and consistent payouts through the 11 dividend fortresses.
• Hunt for quality at a discount by checking companies that combine strong fundamentals with attractive pricing using the 57 high quality undervalued stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.