Ipsen Earnings: Strong Dysport, Cabometyx Sales Drive Top-Line Growth, Shares Slightly Undervalued

Ipsen IPN reported strong second-quarter results highlighted by total revenue of EUR 795 million, representing nearly 7% growth from the prior-year period. Strong revenue contributions from Dysport and Cabometyx helped drive the company’s growth during the quarter as their sales increased 33% and nearly 19.5% year over year, respectively. We maintain our fair value estimate of EUR 120 per share and view the stock as slightly undervalued, currently trading at a 6% discount to our fair value estimate. We maintain Ipsen’s narrow economic moat rating, which is based on its strong intangible assets.

We forecast Ipsen will achieve total sales growth in the midsingle digits in 2023 as strong performance from the company’s growth platforms (Dysport, Decapeptyl, and Cabometyx) will help offset declining sales from Ipsen’s leading oncology product, Somatuline, which accounted for 40% of total sales in 2022. Cabometyx’s strong performance reflected increased volume uptakes in second-line renal cell carcinoma and as a first-line therapy in combination with nivolumab. Dysport’s performance was largely driven by additional growth in the aesthetics market.

We forecast declines in economic profits for Somatuline, which has experienced increased competition and adverse pricing from generics. Growth from Ipsen’s other marketed products, which have patents that extend until the early to mid-2030s, should somewhat offset the negative impact from generic entry. Additionally, Ipsen’s healthy free cash flow, which increased by nearly 10% year over year, should allow the company to be well positioned to fund the development of pipeline candidates over the next decade.

Operating cash flow totaled EUR 528 million during the first half of 2023, which is a 21.5% increase year over year, driven by better working capital requirement changes mainly from an increase in trade payables and a higher increase in accounts receivables in the first half of 2022.