Is Legend Biotech's (LEGN) Sharp Share Price Decline a Hidden Buying Opportunity?

The recent 32.28% drop in Legend Biotech (LEGN) shares, which hit a 52-week low of $25.66 as of December 2025, has sparked debate among investors about whether the stock is undervalued or overcorrecting for structural challenges. While third-quarter 2025 earnings showed a 70% year-over-year revenue surge to $272.33 million, its net loss of $39.7 million and a negative net margin of -26.37% underscore persistent profitability hurdles. This article evaluates whether the sharp decline represents a dislocated valuation opportunity, balancing the company's long-term growth catalysts against its operational and financial risks.

Valuation Dislocation: A Tale of Two Models

Legend Biotech's valuation appears to straddle a knife's edge. On one hand, forward P/E ratio of -591.00 and P/S ratio of 0.00 suggest the market is pricing in negligible earnings, yet its cash reserves of $1 billion and current ratio of 2.86 highlight robust liquidity. Analysts like Cantor Fitzgerald and RBC Capital have raised price targets to $75 and $74, respectively, while UBS trimmed its target to $48, reflecting divergent views on the company's near-term prospects.

Discounted cash flow (DCF) models further complicate the picture. Simply Wall Street estimates a fair value of $75.06, implying a 200% upside from the December 2025 price of $25.08. Conversely, Alpha Spread's DCF model suggests intrinsic value at $19.03, below the current price, signaling overvaluation. This divergence underscores the uncertainty surrounding Legend Biotech's path to profitability. However, the company's 91.4% three-year revenue growth and ambitious 2026 profitability target could justify optimism if operational efficiency improves.

Long-Term Growth Catalysts: CARVYKTI and Beyond

Legend Biotech's flagship product, CARVYKTI (ciltacabtagene autoleucel), remains a cornerstone of its value proposition. Third-quarter net trade sales of $524 million-up 84% year-over-year-reflect strong demand in the CAR-T therapy market. Clinical data from the CARTITUDE-1 trial, showing one-third of patients with relapsed multiple myeloma remaining progression-free for ≥5 years, has reinforced the drug's label updates in the U.S. and Europe. Expansion into newly diagnosed patients could unlock a larger market, while pipeline candidates targeting solid tumors and hematologic malignancies offer diversification.

Strategic moves, including a potential dual listing in Asia or Europe and the appointment of Carlos Santos as CFO, signal long-term confidence. The company's manufacturing expansion to 10,000 annual doses also positions it to meet growing demand. Analysts at Royal Bank of Canada and Barclays maintain "Outperform" and "Overweight" ratings, citing these catalysts.

Risks and Realities: A Cautious Outlook
Despite these positives, risks loom large. The biotech sector's average P/S ratio of 9.01 contrasts sharply with Legend Biotech's 0.00, suggesting the market is discounting its revenue potential. Operational challenges include a -40.83% net margin and supply chain constraints that could delay manufacturing expansion. Regulatory hurdles in international markets and competition from rival CAR-T therapies, such as Bristol Myers Squibb's Breyanzi and Novartis' Kymriah, could erode market share.

Moreover, the Beneish M-Score, which flags potential financial manipulation, adds a layer of caution. While the company's cash position is strong, its reliance on capital-intensive R&D and manufacturing means profitability hinges on sustained revenue growth and cost control.

Conclusion: A Calculated Bet

Legend Biotech's sharp share price decline reflects a mix of near-term operational struggles and long-term promise. The stock's current valuation, trading at a significant discount to analyst price targets ($73.48 average) and DCF estimates, suggests dislocation. However, the path to profitability remains unproven, with risks including margin pressures, regulatory delays, and market saturation.

For investors with a high-risk tolerance and a long-term horizon, the decline may present an opportunity to capitalize on the company's innovative pipeline and strategic initiatives. Yet, prudence is warranted. As UBS and Weiss Ratings caution, the stock's volatility and financial metrics demand careful monitoring. In the end, the answer to whether this is a hidden buying opportunity depends on whether Legend Biotech can translate its scientific promise into sustainable profitability.