Morningstar | Following Astra Deal, We're Raising Our Sobi FVE to SEK 240
After incorporating the pending acquisition of U.S. rights to AstraZeneca's mature respiratory syncytial virus antibody Synagis and pipeline RSV antibody MEDI8897, we're raising our Sobi fair value estimate to SEK 240 from SEK 234. Overall, we see the recent Novimmune (emapalumab) deal and the pending Astra deal as supporting Sobi's efforts to build an immunology portfolio, and strong margins for Synagis should further bolster Sobi's 2019 EBITA growth. While Synagis is a mature product with a limited patient population (high-risk infants), MEDI8897 could benefit full-term infants as well, creating a broader market opportunity. We still incorporate a 50% probability that Sobi is acquired, but we now use a 7 times multiple on our 2019 sales forecast for Sobi to arrive at a potential acquisition price of SEK 299 per share (slightly lower than our prior 8.4 times multiple, now that 2019 sales incorporate another mature asset, Synagis). On a stand-alone basis, we now value Sobi at SEK 182 per share (up from SEK 153 per share). Despite efforts to diversify away from its hemophilia portfolio, we still think exposure to an increasingly competitive hemophilia market prevents Sobi from establishing an economic moat.Sobi is acquiring U.S. rights to RSV prophylaxis therapy Synagis from Astra in a $1.5 billion deal that also gives Sobi partial rights to U.S. profits for MEDI8897 (a longer-acting therapy aimed at a broader infant population and part of a collaboration between Astra and Sanofi that is poised to enter phase 3 trials). Sobi is using $1 billion in cash (new credit facilities will result in Sobi net debt of SEK 6 billion) and $500 million in stock (24.2 million shares) to pay for the rights. Sobi could also be in the hook for $470 million in Synagis sales-related payments in 2026 and beyond and smaller payments tied to progress with MEDI8897. The deal is expected to close by early 2019.
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