Morningstar | Maintaining Our Sobi FVE Following 4Q Results; Roche's Hemlibra Launching in 2019
Sobi reported fourth-quarter 2018 results that were slightly stronger than we had modeled, largely due to royalties and in-market sales for hemophilia drugs Elocta and Alprolix and hemophilia manufacturing revenue, resulting in SEK 9.1 billion in revenue and SEK 8.97 earnings per share for the full year. We don't expect any significant changes to our SEK 240 per share fair value estimate, which is based on a stand-alone fair value of SEK 182 and a 50% probability of an acquisition at SEK 299, which implies a 7 times multiplier on our 2019 sales forecast. Sales of Elocta and Alprolix in Sobi's territories grew to SEK 4.2 billion in 2018 from SEK 1.9 billion in 2017, more than doubling as the drugs penetrate European markets. Alprolix and Elocta returned to quarterly growth in the fourth quarter after a weaker third quarter (adjusting for Elocta's tax clawback recorded in the third quarter). EBITA margins improved from 32% to 39% in 2018, and while 2019 revenue guidance implies 38%-43% top-line growth, EBITA guidance implies a margin just north of 40% as the firm's margin expansion is slowed as it incorporates the Synagis team and expands R&D on Gamifant. Despite Sobi's efforts to diversify away from its hemophilia portfolio, we still think Sobi's exposure to an increasingly competitive hemophilia market prevents it from establishing an economic moat. We're cautious on Elocta's prospects, particularly as Roche's Hemlibra could be approved in Europe imminently (it received a positive opinion at the start of February).Sobi's immunology franchise is being highlighted as key for future growth, but we're below management's guidance on Gamifant's potential, and there is still significant uncertainty around future sales of MEDI8897. Gamifant (emapalumab) was approved by the FDA in November 2018 as a treatment for rare disease primary haemophagocytic lymphohistiocytosis, or HLH, a cytokine storm syndrome, and should receive European regulatory approval in 2019. The drug is also being studied in immune-oncology, where cytokine storms and secondary HLH are common side effects of some treatments. Sobi sees potential peak sales between SEK 2.5 billion and 3 billion, just under the roughly SEK 4 billion cost to acquire it, but we model more modest revenue in the near term, as most patients have the secondary form of the disease. The $1.5 billion acquisition of U.S. rights to Astra's mature respiratory syncytial virus, or RSV, prophylaxis therapy antibody Synagis and partial U.S. profits to pipeline RSV antibody MEDI8897 was announced in November and closed in January. While Synagis is a mature product with a limited patient population (high-risk infants), MEDI8897 is poised to enter phase 3 trials and could benefit full-term infants as well, creating a broader market opportunity (but very likely at a lower price point, and Sobi shares rights with Sanofi and Astra).
Swedish Orphan Biovitrum AB is a healthcare company focused on rare diseases. Co. develops, manufactures and commercializes treatments with a particular focus on four therapeutic areas: Inflammation, Genetics & Metabolism, Haemophilia and Neonatology. Co. also markets a portfolio of rare disease products for partner companies. Co.'s pipeline programmes include research and development focused on recombinant protein drugs in late preclinical and clinical phase for indications.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
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