$0.15
$3.28
bear $0.15
base $3.03
bull $3.28
margin of safety $1.40
market price* $6.12
Business condition attached to the margin of safety
FDA approval of envudeucitinib (envu) for plaque psoriasis, with the company still holding enough cash to launch without an emergency equity raise.
Alumis is a South San Francisco drug developer with no approved products. Nearly all of its value rests on one drug, envudeucitinib (envu), an oral TYK2 inhibitor for immune diseases. On January 6, 2026 it reported that envu met all primary and secondary endpoints in two pivotal Phase 3 psoriasis trials (ONWARD1 and ONWARD2): on average 74% of patients reached PASI 75 and 59% reached clear or almost-clear skin at week 16, with mostly mild side effects. The company plans to file for FDA approval in the second half of 2026, which on a standard review points to a decision around the second half of 2027. Envu is also in a Phase 2b lupus trial (LUMUS). A brain-penetrant follow-on, A-005, is in early testing. Lonigutamab, a thyroid eye disease antibody that came with the May 2025 ACELYRIN merger, was written down by $41.8 million in the second quarter of 2026. The only revenue so far comes from Kaken Pharmaceutical, which licensed envu for skin diseases in Japan in March 2025. Kaken paid $20 million up front and $20 million toward development through 2026. It also owes up to $36 million more for regulatory milestones and option exercises, plus royalties on any Japanese sales. The business uses a lot of cash. On our measure of owner earnings (operating cash flow, excluding working-capital swings and charging stock compensation as a real cost), Alumis lost $155 million in 2023, $291 million in 2024 and $432 million in 2025, or about $5.07 per share in 2025. The 2025 accounting loss of $243 million looks smaller only because it includes a one-time, non-cash $188 million gain from buying ACELYRIN for less than its net assets. We excluded that gain. Operating cash use in the first half of 2026 was $169 million, about $84 million a quarter. At June 30, 2026 the company held $502 million of cash and short-term investments, raised mainly through a $324 million stock offering in January 2026. It has no borrowings and total liabilities of $108 million, mostly accrued trial costs and office leases. It also has a $300 million at-the-market program for selling new shares, so further dilution is likely. We used about 130 million shares, which includes a modest allowance for options and restricted stock. How we valued it: we give no credit for envu sales, royalties or profit margins because none exist yet. Positive trial results are real evidence, but approval, price, share of a crowded market (Bristol Myers Squibb's Sotyktu is already approved in psoriasis, and injectable biologics dominate) and the cost of a launch are all still ahead. That leaves the company's net cash, plus whatever the continued spending is judged to create. Base case, about $3.03 per share: the planned spending to file, win approval and prepare a launch buys an approved asset worth roughly what it cost, no more and no less. Shareholders' value is then today's cash of $502 million minus $108 million of liabilities, about $394 million, with no debt to repay. This case also covers the $50 million owed to envu's original owner on first approval, as part of that cost. Bear case, about $0.15 per share: the FDA turns down or delays envu, or approves it with a label that cannot compete. Spending at the current rate for about five quarters until the decision uses roughly $420 million. Most of what remains goes to leases (about $53 million of committed payments at year-end 2025) and wind-down costs. Little is left for shareholders, though the company is not expected to owe more than it has. Bull case, about $3.28 per share: approval arrives on the company's timetable. Kaken's contracted regulatory and option payments of up to $36 million (about $32 million in today's money) are added to the base case's net cash of roughly $394 million. We still credit no product sales. What would make this wrong: the valuation deliberately ignores the most likely source of large value, successful envu sales. If envu is approved and its sales build, the value per share could be several times these figures, and we would revalue once real sales exist. In the other direction, if spending rises well above $85 million a quarter for a launch, or new shares are sold at low prices, per-share value falls faster than shown here.