Key Points
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Roivant Sciences anticipates three commercial launches over the next few years, led by brepocitinib.
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The stock is arguably expensive now, even with aggressive revenue estimates for 2031.
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That’s not good, considering how much can still go wrong between now and then.
- 10 stocks we like better than Roivant Sciences ›
The pharmaceutical industry is massive, worth over $1.7 trillion globally in 2024. So when an up-and-coming player emerges, it can deliver life-changing returns for investors fortunate enough to get in early. Roivant Sciences (NASDAQ: ROIV) certainly seems like a rising star. The biotech stock has more than tripled over the past year, soaring to $35 per share and a market cap of $25 billion.
Roivant is a biotech company turning a loaded pipeline into reality, and its sales could soar into the billions of dollars over the next five years. But can the stock continue to deliver multibagger returns? That won’t be as easy after its recent ascension. Here’s some math to consider when setting expectations for the stock.
A loaded pipeline with big things ahead
Roivant Sciences builds small, focused subsidiaries called Vants that develop drug products and technologies to treat various diseases and health conditions. Across these Vants, Roivant has amassed an impressive pipeline that management expects will have three commercial launches over the next three years. Its lead drug candidate is brepocitinib, an oral drug for treating dermatomyositis, a chronic inflammatory disease affecting the skin and muscles.
The company has only generated $8.3 million in revenue over the past 12 months, but that’s about to change in a big way. Wall Street estimates compiled by market intelligence company Fintel peg 2027 revenue at approximately $1 billion, rising to $4.5 billion in 2031. Now, those estimates assume that drug approvals go as planned, which isn’t a certainty by any means. Still, the market expects enormous growth from Roivant Sciences, which helps explain the stock’s recent rise.
Why buying now could be an uphill battle
You may have heard the expression that the price you pay matters, but it rings truest in these situations.
If you assume that Roivant does, in fact, reach $4.5 billion in sales in 2031, the stock, at a $25 billion market cap, already trades at 5.6 times those sales. A healthcare industry leader such as AbbVie trades at about 7 times its trailing-12-month sales, never mind revenue five years out.
If you buy Roivant Sciences now, you’re assuming a lot of things go right over the coming years. Expectations can change, or better or worse, with a single clinical-trial readout.
But you need even more from Roivant if you’re buying the stock as a potential multibagger over the next five years — from here, that would mean the stock needs to reach a market cap of at least $50 billion to $75 billion. Is that possible? Of course. Is it likely? Probably not.
Should you buy stock in Roivant Sciences right now?
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Justin Pope has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends AbbVie. The Motley Fool recommends Roivant Sciences. The Motley Fool has a disclosure policy.
