Our price target for Akero is $80 per share. This was derived by conducting a discounted cash flow (DCF) analysis in which we project risk-adjusted free cash flows through 2036 and utilize a terminal growth rate of 2%. We then discount these cash flows back by 12.5% annually, consistent with mid-stage clinical companies in our biotechnology universe.

We rate Akero Therapeutics as High Risk based on the usual volatility of biotech stocks and uncertainty/risk related to clinical trials, late-stage drug development, and regulatory decisions. Akero has many of the risks associated with biotechnology companies. Share performance is closely linked to clinical and regulatory updates. Any such updates that fall short of expectations would lead to downside versus our target price. Due to the high cost of Akero’s development effort, we highlight the risk of potential equity or product financings. If the impact on the company from any of these factors proves to be greater than we anticipate, the stock could be under pressure.