We came across a bullish thesis on Verona Pharma plc (VRNA) on Value Investing Subreddit Page by loud_keyb. In this article, we will summarize the bulls’ thesis on VRNA. Verona Pharma plc (VRNA)’s share was trading at $67.50 as of March 4th. VRNA’s forward P/E was 434.78 according to Yahoo Finance.
A scientist working in a laboratory performing tests on a newly developed biotechnology drug.
Verona Pharma (VRNA) has reported strong Q4 earnings, reinforcing the bullish case for its long-term growth. CEO Mark Hahn indicated that sales could approach $300 million in 2025, though the company refrained from issuing formal guidance. However, management did not contest the consensus estimate of $270 million and hinted at exceeding it. The company’s lead product, Ohtuvayre, is emerging as a market mainstay, with growing adoption and refills expected to drive recurring revenue, mirroring the success of Trelegy, where 90% of sales come from refills. Verona estimates that capturing just 5-10% of the U.S. market could generate $5.5B-$11B in annual sales, with each 1% share equating to $1.1B in revenue. The company is progressing in its expansion, with Phase 2 trials for Bronchiectasis underway and patent protection extending into the 2040s.
Financially, Verona’s sales trajectory is accelerating, with October revenue of $5.6 million tripling by January and February 2025 to approximately $18 million per month. If this growth continues, Q1 revenue is projected to reach at least $54 million, potentially bringing the company to operational profitability. Conservative growth assumptions for 2025 estimate full-year sales of $810 million, far exceeding management’s $270 million target. Given low expected expenses, operational income could reach $540 million, translating to an EPS of $6.60. Applying a P/E of 10, VRNA could trade around $66 per share, suggesting that current valuations may significantly underestimate its earnings power.
Risks remain, including uncertainties in refill rates and potential R&D costs. While some may argue that Verona’s 2025 potential is priced in, the company’s moat—bolstered by its first-mover advantage and patent protection—supports a premium valuation. Growth investors will find VRNA’s fundamentals compelling, making it a strong hold with significant upside potential.
Verona Pharma plc (VRNA) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 42 hedge fund portfolios held VRNA at the end of the fourth quarter which was 25 in the previous quarter. While we acknowledge the risk and potential of VRNA as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than VRNA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.