Alvotech: Potential Victim Of Pharma Tariff Threats (Rating Downgrade)

2025-04-30 16:39:15 ET

Summary

• Alvotech's stock has dropped significantly due to potential tariffs and ongoing profitability challenges, despite strong revenue growth and a promising biosimilar pipeline.
• The company's reliance on Icelandic manufacturing and potential US import tariffs create substantial uncertainty, complicating the investment outlook.
• Alvotech's biosimilars for Humira and Stelara show promise, but competition and market dynamics make profitability elusive.
• Given the current uncertainties and potential headwinds, I recommend waiting for more clarity before considering Alvotech stock a "buy the dip" opportunity.

Investment Overview

I last covered Alvotech ( ALVO ) for Seeking Alpha in a note published last August , in which I gave its stock a “Buy” rating. Shares traded at $12 at the time and ended 2024 trading at ~$13.5, but since mid-February, they have slid substantially in value, to ~$8 at the time of writing, valuing the business at a market cap of ~$2.4bn.

First, let's remind ourselves of Alvotech's core business, as per its 2024 annual report / 20F submission :

We are a vertically integrated biotech company focused solely on the development and manufacture of biosimilar medicines for patients worldwide.

A biosimilar is a biological medicine that is highly similar to and has no clinically meaningful differences from an existing approved biological, or reference product. Much as generics do for off-patent small-molecule drugs, biosimilars provide a cost-effective alternative with no clinically meaningful difference to biologic medicines whose patent exclusivity has expired.

Developing and manufacturing biosimilars is a time-consuming, capital-intensive, complex, and historically uncertain undertaking. We currently have two approved products and an additional nine product candidates in our portfolio and pipeline, targeting serious diseases with unmet patient and market needs. Product candidates in our pipeline address reference products treating autoimmune, eye, and bone disorders, as well as cancer.

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