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Paratek Revenue Ramp-Up Is Underappreciated By The Market And Should Drive Stock Price Gains

Mar. 05, 2020 11:48 AM ETParatek Pharmaceuticals, Inc. (PRTK)54 Comments


  • Nuzyra product revenues doubled Q42019 from Q32019 when accounting for inventory to $6.1MM. Paratek trades at ~2.3 times FY2020 revenue guidance & ~1.3X consensus FY2021 revenue estimates.
  • Paratek says it has enough liquidity, without additional dilution, until it breaks even in 2H2023 (debt free) with a realistic pathway to $500MM in 2024 revenues via only current indications.
  • 2 additional indications & EU launches could add hundreds of millions in revenues before FY2024 (but not needed to break even by Q42023 nor hit the $500MM FY2024 revenue target).
  • Recent 5-year BARDA agreement (up to $285MM) & other wins materially mitigate the risk Paratek misses its goals until FY2024 (BARDA not needed to hit $500MM revenue target in 2024).
  • Should PRTK meet preliminary FY2024 guidance, our analysis concludes PRTK could trade for ~$45/share in 2H2023 (Present Value = ~$16/share today) or 5X FY2024 revenues of $500MM (with no debt).

Our analysis concludes Paratek Pharmaceuticials ("PRTK") share price could materially grow over the next few years as revenues are expected to grow ~5X in FY2020 to $75MM to $80MM per PRTK's recent guidance (from $16.5MM in FY2019) eventually totaling a preliminary and tentative PRTK target of $500MM in FY2024. Furthermore, PRTK's preliminary & tentative 2024 $500MM revenue target would include a balance sheet free of debt without dilution until then with current indications only. Should PRTK win additional clinical indications (NTM, flu, anthrax), government agreements, China NDA approval in 1H2021 and/or launch in the EU FY2024 guidance could more than double. This is why professional analysts have recent PRTK price targets as high as ~$36 (from BTIG Research). The average professional analyst price target is $15/share. Canaccord Genuity predicts $14/share. (List of PRTK Price Targets)

In the near term, the risk that Paratek won't grow revenues fivefold in FY2020 is strongly mitigated because approximately half of PRTK's estimated FY2020 revenues of $75MM to $80MM (we will say $80MM throughout the rest of this article) are already "in the bank" under the 5 year BARDA agreement discussed below. Under PRTK's BARDA agreement, the government is placing a $38MM order in Q2020. Furthermore, recurring product and royalty revenues in Q42019 were approximately $6.5MM (that were roughly double recurring product & royalty revenues in Q32019). If PRTK were only to maintain $6.5MM in recurring (non-BARDA) product revenues achieved in Q42019 into each quarter in 2020, recurring, non-BARDA, product revenues would therefore be $26MM in 2020 by simple algebra ($6.5MM in Q42019 times 4 quarters in 2020). Hence PRTK is already going into FY2020 with base revenues of approximately $66MM. It is the author's opinion PRTK is setting up a classic "beat & raise" strategy to cement PRTK's credibility and help grow PRTK's share price throughout the year.

This article was written by

Boston area biotechnology professionals with a collective 100+ years experience in the biotech industry. We are not professional analysts and lack the resources of professional analysts. Our articles will include information that is forward looking. You should never rely on forward-looking statements because facts & circumstances can change dramatically and without notice. In plain English do not take us so seriously.

Analyst’s Disclosure: I am/we are long PRTK. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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