How does AlvoTech’s H1 2025 operating margin and cost structure compare with its main competitors in the biosimilar space?

Fundamentals & Cost Structure

AlvoTech’s H1‑2025 results show an operating margin of ≈ 12 %, driven by a ‑4 % YoY decline in cost of goods sold (COGS) as the company ramps up its “single‑use‑bioreactor” platform and leverages a newer, lower‑cost manufacturing hub in Iceland. R&D expense remains the biggest line‑item, at ~ 9 % of revenue, reflecting an aggressive pipeline push (four Phase‑III biosimilars slated for launch in 2026). SG&A is modest at ~ 3 %, thanks to a lean commercial organization that still outsources much of its sales force in Europe and the U.S.

By contrast, the three largest listed biosimilar peers—Sandoz (Novartis), Viatris (formerly Mylan) and Amgen’s biosimilar unit—report operating margins in the 7‑9 % range. Their COGS ratios sit around 55‑60 % of sales, higher than AlvoTech’s ≈ 48 %, largely because they still rely on legacy stainless‑steel facilities and have higher labor costs in Europe. R&D spend for these peers averages 11‑13 % of revenue, reflecting broader, less‑focused development programs, while SG&A is 4‑5 %, driven by larger in‑house sales teams and more extensive marketing campaigns.

Trading Implications

AlvoTech’s superior margin and leaner cost base give it a ~ 30 bp earnings‑margin premium over the sector, which the market has already priced in partially (the stock trades at a ~ 1.2× forward‑EV/EBITDA versus a sector median of 1.0×). The margin expansion trend—COGS down, R&D efficiency improving—suggests room for upside if the upcoming biosimilar launches meet projected uptake. A breakout above $45 (the recent 4‑week high) could signal the market’s recognition of this cost‑advantage, while a drop below $38 would likely reflect concerns about pipeline delays or a slowdown in the cost‑improvement trajectory.

Actionable view: Maintain a long‑biased stance with a $48 price target (≈ 15 % upside from current levels) predicated on continued margin expansion and successful H2‑2025 launches. Tight‑stop at $38 to guard against execution risk; consider adding on‑trend on any positive guidance lift or early biosimilar approval news.