Our 12-month target price for AVBP is $33, derived using a discounted cash flow (DCF) analysis. We use a weighted average cost of capital (WACC) of 13.0%. Arrivent’s issued and pending patents for firmonertinib are expected to expire between 2037 and 2043. Thus, we explicitly model cash flows to 2042 to align with the approximate expected patent life of firmonertinib. After 2042, we assume a terminal growth rate of -50% which is in line with other platform companies in our coverage.

We rate AVBP High Risk based on the typical volatility of biotech stocks and uncertainty/risk associated with clinical trials and drug development. Specific sources of downside risk that could prevent shares from reaching our target price include: 1) FURVENT Ph3 trial may fail and not replicate the results from the FURTHER Ph2 study; 2) Firmonertinib could lose its development lead in oral EGFR exon 20 TKI competition; 3) Ph3 results from competitors might outperform firmonertinib in terms of efficacy, safety, or CNS activity; and 4) for PACC mutations, firmonertinib may fail to show significant overall efficacy.