Alvotech's Healthy Earnings Mask Deeper Issues.

Alvotech reported healthy earnings, but its stock rose despite deeper issues. The company's accrual ratio of 0.33 indicates that free cash flow fell short of covering statutory profit, and it actually burnt through $140m in the last year. A recent tax benefit and unusual items impacted its profit, but shareholders should look for improved cash flow relative to profit in the current year.

Alvotech (NASDAQ: ALVO), a global biotech company specializing in biosimilar medicines, reported healthy earnings in its latest quarter. Despite this, the company's stock price rose, indicating investor confidence in its future prospects. However, a deeper analysis reveals underlying financial concerns.

The company's accrual ratio of 0.33 indicates that free cash flow fell short of covering statutory profit, leading to a net cash burn of $140 million over the last year [1]. This discrepancy was exacerbated by a recent tax benefit and unusual items that impacted its profit, masking the true financial health of the company. While these factors should be considered, shareholders should look for improved cash flow relative to profit in the current year.

Alvotech's partnership with Advanz Pharma, a UK-headquartered global pharmaceutical company, is a strategic move aimed at expanding its commercial footprint in Europe. The companies have entered into a supply and commercialization agreement for AVT10, a biosimilar candidate to Cimzia® (certolizumab pegol), targeting the European market [2]. This partnership, which includes the development of over ten biosimilar candidates, positions Alvotech as a significant player in the global biosimilar market, particularly in developing complex biosimilar candidates.

The company's ability to maintain its competitive edge and secure strong commercialization partners in key markets will be crucial for its long-term success. Investors should closely monitor Alvotech's cash flow and profit margins to gauge the company's financial health and assess the potential impact of its biosimilar pipeline on future earnings.

References:
[1] https://seekingalpha.com/news/4487943-alvotech-advanz-pharma-get-eu-nod-for-eylea-biosimilar
[2] https://www.stocktitan.net/news/DPZ/domino-s-best-deal-ever-offer-has-03iw3mh4yrhy.html