Breaking Down Mirati Therapeutics, Inc. (MRTX) Financial Health: Key Insights for Investors

Understanding Mirati Therapeutics, Inc. (MRTX) Revenue Streams

Understanding Mirati Therapeutics’ Revenue Streams

The primary revenue source for the company is derived from the sales of its product, KRAZATI, which was commercially launched in the U.S. in December 2022. The revenue streams can be categorized as follows:

• Product Revenue: For the three months ended September 30, 2023, the product revenue, net was $16.4 million. For the nine months ended September 30, 2023, the product revenue, net was $36.1 million.
• License and Collaboration Revenues: The company recognized license and collaboration revenues of $1.2 million for the nine months ended September 30, 2023, compared to $11.5 million for the same period in 2022.

Year-over-Year Revenue Growth Rate

The year-over-year revenue growth reflects significant changes due mainly to the introduction of KRAZATI:

The total revenue increased from $5.4 million in Q3 2022 to $16.4 million in Q3 2023, marking a substantial increase attributable to the product revenue from KRAZATI.

Contribution of Different Business Segments to Overall Revenue

In Q3 2023, the contribution breakdown is as follows:

• Product Revenue: $16.4 million (100% of total revenue)
• License and Collaboration Revenue: $0 million

In comparison, for the nine months ended September 30, 2023:

• Product Revenue: $36.1 million (approximately 96.7% of total revenue)
• License and Collaboration Revenue: $1.2 million (approximately 3.3% of total revenue)

Analysis of Significant Changes in Revenue Streams

The significant change in revenue streams for the company is primarily due to the launch of KRAZATI, which generated product revenue in 2023 after not contributing any revenue in 2022. The license and collaboration revenues have seen a marked decrease from $11.5 million in the first nine months of 2022 to $1.2 million in the same period of 2023, indicating a shift towards reliance on product sales rather than collaboration agreements.

Overall, the company’s financial performance has showcased a transition from minimal revenue generation to a substantial increase due to its product launch, highlighting the importance of KRAZATI in its revenue model moving forward.

A Deep Dive into Mirati Therapeutics, Inc. (MRTX) Profitability

A Deep Dive into Mirati Therapeutics, Inc. Profitability

Gross Profit Margin: For the three months ended September 30, 2023, the gross profit margin was approximately 91.35%, calculated as follows:

Operating Profit Margin: The operating profit margin for Q3 2023 was approximately -104.2%. This is derived from:

Net Profit Margin: The net profit margin for Q3 2023 was approximately -987.4%, calculated from:

Trends in Profitability Over Time

Over the nine months ended September 30, 2023, the company reported a net loss of $(523.4 million) compared to $(538.4 million) for the same period in 2022. The following table summarizes the trend in losses:

Comparison of Profitability Ratios with Industry Averages

The industry average net profit margin for biopharmaceutical companies is around -20%. The following table compares the company's margins to the industry average:

Analysis of Operational Efficiency

The company reported research and development expenses of $114.8 million for Q3 2023, down from $131.1 million in Q3 2022. The decrease is attributed to reduced clinical development costs:

The gross margin trend indicates an improvement in operational efficiency as product revenue increases:

Debt vs. Equity: How Mirati Therapeutics, Inc. (MRTX) Finances Its Growth

Debt vs. Equity: How Mirati Therapeutics, Inc. Finances Its Growth

As of September 30, 2023, Mirati Therapeutics, Inc. reported total liabilities of $183.2 million compared to $206.1 million at the end of December 2022. This includes current liabilities of $137.4 million and long-term liabilities of $45.8 million.

The company has a total stockholders' equity of $946.5 million, reflecting a decrease from $996.5 million at the end of December 2022. This shift indicates a reliance on equity financing to support its operations.

Debt-to-Equity Ratio and Comparison to Industry Standards

Mirati's debt-to-equity ratio is calculated as follows:

• Total Debt: $183.2 million
• Total Equity: $946.5 million
• Debt-to-Equity Ratio: 0.19

This ratio is significantly lower than the biotechnology industry average, which typically ranges from 0.3 to 0.5. This indicates a conservative approach to leveraging debt in its capital structure.

Recent Debt Issuances, Credit Ratings, or Refinancing Activity

In August 2023, Mirati completed a public offering of common stock and warrants, generating net proceeds of $332.5 million. The company has not reported any recent debt issuances or refinancing activities.

Balancing Between Debt Financing and Equity Funding

Mirati has primarily funded its operations through equity financing, including common stock offerings and collaborations. As of September 30, 2023, the company had $976.4 million in cash, cash equivalents, and short-term investments, down from $1.1 billion at the end of 2022. This liquidity is expected to support its operations for at least one year from the reporting date.

Assessing Mirati Therapeutics, Inc. (MRTX) Liquidity

Assessing Liquidity and Solvency

Current and Quick Ratios

As of September 30, 2023, the current ratio stood at 7.1, calculated using current assets of approximately $1.0 billion and current liabilities of $137.4 million. The quick ratio, which excludes inventory, is similarly robust, reflecting a strong liquidity position.

Analysis of Working Capital Trends

Working capital is calculated as current assets minus current liabilities. As of September 30, 2023, working capital was approximately $862.6 million. This represents a significant increase from $851.5 million as of December 31, 2022. The improvement indicates enhanced short-term financial health, allowing for better operational flexibility.

Cash Flow Statements Overview

The cash flow statements for the nine months ended September 30, 2023, reveal:

Cash flows from operating activities reflect a net loss of $523.4 million for 2023, adjusted for non-cash items such as share-based compensation of $130.9 million. Investing activities primarily consisted of sales and maturities of short-term investments, while financing activities were bolstered by net proceeds from stock offerings totaling $332.5 million in August 2023.

Potential Liquidity Concerns or Strengths

Despite the strong liquidity ratios, the company faces potential liquidity concerns due to ongoing high cash burn rates, with net losses reaching $523.4 million for the nine months ended September 30, 2023. The accumulated deficit has risen to $3.0 billion, indicating the need for continuous capital to sustain operations and fund ongoing research and development. However, the availability of approximately $345 million under the At the Market Facility provides a buffer for future financing needs.

Is Mirati Therapeutics, Inc. (MRTX) Overvalued or Undervalued?

Valuation Analysis

As of September 30, 2023, the company reported a net loss of $161.9 million for the three months ended September 30, 2023, compared to a net loss of $173.6 million for the same period in 2022. For the nine months ended September 30, 2023, the net loss was $523.4 million, down from $538.4 million in the previous year.

For the three months ended September 30, 2023, the company recorded product revenue of $16.4 million from sales of KRAZATI, which was launched in December 2022. Total revenue for the nine months ended September 30, 2023 was $37.3 million.

Price-to-Earnings (P/E) Ratio

The company does not currently have positive earnings, thus the P/E ratio is not applicable. However, for companies in development stages, alternative valuation metrics are often used.

Price-to-Book (P/B) Ratio

As of September 30, 2023, the total shareholders' equity was $946.5 million with 70,111,309 shares outstanding, leading to a book value per share of approximately $13.49. If the stock price is $27.80, the P/B ratio is approximately 2.06.

Enterprise Value-to-EBITDA (EV/EBITDA) Ratio

Given the negative EBITDA, the EV/EBITDA ratio cannot be calculated directly. However, the enterprise value can be assessed using the market capitalization and debt levels. As of September 30, 2023, the company had cash and cash equivalents of $976.4 million.

Stock Price Trends

Over the past 12 months, the stock price has fluctuated significantly. The stock was trading at approximately $30.00 a year ago and has seen highs of around $38.00 and lows of approximately $20.00.

Dividend Yield and Payout Ratios

The company does not currently pay dividends. As such, the dividend yield is 0% and the payout ratio is also 0%.

Analyst Consensus

Analyst consensus as of October 2023 indicates a rating of Hold with price targets ranging from $25.00 to $35.00.

Key Risks Facing Mirati Therapeutics, Inc. (MRTX)

Key Risks Facing Mirati Therapeutics, Inc.

Internal and External Risks

The company faces significant internal and external risks that could impact its financial health. Key risks include:

• Industry Competition: The oncology market is highly competitive, with numerous companies developing similar therapies. This competition could lead to reduced market share and pricing pressure.
• Regulatory Changes: Changes in regulations or guidelines from agencies such as the FDA could impose additional requirements on clinical development or commercialization processes.
• Market Conditions: Fluctuations in market conditions can affect the company’s ability to raise capital or achieve favorable terms in financing.

Operational, Financial, or Strategic Risks

Recent earnings reports highlight operational and financial risks, including:

• Research and Development Costs: The company reported research and development expenses of $114.8 million for the three months ended September 30, 2023, compared to $131.1 million for the same period in 2022.
• Net Losses: The net loss for the three months ended September 30, 2023, was $161.9 million, compared to $173.6 million for the same period in 2022.
• Accumulated Deficit: The company has an accumulated deficit of $2.976 billion as of September 30, 2023.

Mitigation Strategies

The company employs several mitigation strategies to address these risks:

• Financing Strategies: As of September 30, 2023, the company had $976.4 million in cash, cash equivalents, and short-term investments. This liquidity is critical for funding ongoing research and development efforts.
• Collaboration Agreements: The company has entered into collaboration agreements, such as the BeiGene Agreement, which includes potential milestone payments of up to $123 million.
• Market Adaptation: The company is actively working to establish effective pricing and reimbursement strategies for its products, including KRAZATI, to ensure market acceptance.

Future Growth Prospects for Mirati Therapeutics, Inc. (MRTX)

Future Growth Prospects for Mirati Therapeutics, Inc.

Analysis of Key Growth Drivers

The company has identified several key growth drivers that are expected to propel its future success.

• Product Innovations: The launch of KRAZATI, which received FDA approval in December 2022, has already shown significant revenue potential. Product revenue, net for the nine months ended September 30, 2023, reached $36.1 million.
• Market Expansions: The company continues to explore opportunities in international markets for KRAZATI and its other pipeline products, which could enhance its revenue base.
• Acquisitions: The recent merger agreement with BMS, announced on October 8, 2023, positions the company for enhanced resource allocation and strategic alignment.

Future Revenue Growth Projections and Earnings Estimates

Revenue projections for the coming years suggest a positive trend, especially with the anticipated growth of KRAZATI. Analysts project that product revenue could exceed $100 million by 2025, contingent on market acceptance and expansion efforts.

Strategic Initiatives or Partnerships Driving Future Growth

The strategic partnership with BeiGene is noteworthy. Under the BeiGene Agreement, the company stands to receive up to $123 million in milestone payments, which could significantly boost its financial stability. Additionally, collaboration agreements with other pharmaceutical companies for pipeline products further enhance its growth potential.

Competitive Advantages Positioning the Company for Growth

The company benefits from a strong pipeline, including the promising MRTX1133, which is currently in Phase 1 trials. This pipeline, coupled with its established relationships in the industry, provides a competitive edge.

As of September 30, 2023, the company reported cash, cash equivalents, and short-term investments of $976.4 million, indicating a robust liquidity position to support these growth initiatives.