NewAmsterdam Pharma earnings jolt investor focus

NewAmsterdam Pharma (NasdaqGM:NAMS) moved into the spotlight after its latest earnings report showed second quarter sales of US$3.7 million and a net loss of US$64.14 million, sharpening attention on its financial trajectory.

The recent earnings report landed against a weak share price backdrop for NewAmsterdam Pharma, with a 30 day share price return of down 15.63% and a year to date share price return of down 23.35%. At the same time, the 1 year total shareholder return sits at 7.62% and the 3 year total shareholder return is very large at roughly 15x, which points to fading short term momentum after a strong multi year run.

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After a sharp pullback and heavier losses, NewAmsterdam Pharma now sits at an interesting crossroads for patient capital. Do the current fundamentals and pipeline ambitions still offer enough upside potential to justify the risk?

Preferred Price-to-Book multiple of 5.1x for NewAmsterdam Pharma: Is it justified?

NewAmsterdam Pharma last closed at $26.98, while its current P/B multiple sits at 5.1x. That is above both the US biotechs industry average of 2.5x and the closer peer average of 4.9x, so the stock is carrying a premium on this metric.

The P/B ratio compares the market value of a company to its accounting book value. It is often used for asset light biopharmaceutical companies where traditional earnings metrics are not yet meaningful. For NewAmsterdam Pharma, the 5.1x figure suggests investors are assigning a higher value to its pipeline, future cash flow potential and intellectual property than the balance sheet alone would indicate.

This premium sits alongside the output from the SWS DCF model, which estimates a future cash flow value of $110.76 per share versus the current $26.98 share price. That implies the stock is trading at a 75.6% discount to that modelled fair value, indicating the market price is well below the DCF estimate even though the P/B multiple looks rich compared to industry and peers.

Investors weighing NewAmsterdam Pharma will likely compare this higher P/B ratio and the deep DCF discount to their own expectations for revenue growth, profitability timing and the value of the Obicetrapib franchise.

Result: Price-to-book ratio of 5.1x (OVERVALUED)

However, NewAmsterdam Pharma still faces key risks if Obicetrapib trial data disappoints or cardiometabolic competitors capture physician and payer attention before its programs mature.

Another view on NewAmsterdam Pharma’s value

The earlier discussion highlighted that NewAmsterdam Pharma looks expensive on a 5.1x P/B ratio versus the US biotechs industry at 2.5x and peers at 4.9x. The SWS DCF model points in the opposite direction, with an estimated future cash flow value of $110.76 per share against a $26.98 share price. This suggests the stock may be materially undervalued on that framework. For investors, the question is which lens better reflects the real trade off between Obicetrapib’s potential and the company’s funding and profitability risks.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out NewAmsterdam Pharma 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 50 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 the mixed signals around NewAmsterdam Pharma fresh in mind, this is a good time to move quickly, test the assumptions and form your own view using the 3 key rewards.

Looking for more investment ideas beyond NewAmsterdam Pharma?

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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.