Our 12-month target price for AVBP is $36, 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 furmonertinib 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 furmonertinib. 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) Furmonertinib could lose its development lead in oral EGFR exon 20 TKI competition, 3) Ph3 results from competitors might outperform furmonertinib in terms of efficacy, safety, or CNS activity, 4) For PACC mutations, furmonertinib may fail to show significant overall efficacy. 5) Furmonertinib may not be able to show a competitive profile vs. the current SoC in 2L NSCLC HER2 exon 20 setting.