Morningstar | Swedish Orphan Biovitrum FVE Intact Following 3Q Results as Roche's Hemlibra Poised to Compete
We're not making any significant changes to our fair value estimate for Swedish Orphan Biovitrum following third-quarter results and the incorporation of future emapalumab cash flows into our discounted cash flow model. We continue to assume a 50% probability that the firm is acquired at a similar sales multiple as Bioverativ and a 50% probability using our stand-alone fair value estimate. We do not assign Swedish Orphan Biovitrum an economic moat, given the firm's reliance on profits from two hemophilia therapies for growth and several disruptive threats that are likely to compete in this market.We're cautious on Elocta's prospects, particularly as Roche's Hemlibra could be approved in Europe by the end of this year. Elocta sales of SEK 873 million were barely up sequentially, after removing a tax clawback of SEK 52 million that was applied to Elocta revenue in the third quarter of 2018. Management emphasized that demand was up strongly, and that revenue can lag recent uptake, but we think competition is poised to increase in the near term. Revenue grew 45% in the third quarter to surpass SEK 2.3 billion, aided by exchange rates (34% constant currency). EBITA grew 74% to SEK 933 million, and the firm now has almost SEK 2.5 billion in net cash for future in-licensing deals.
Management slightly tweaked full-year guidance, increasing revenue projections but slightly lower EBITA expectations due to development and commercialization costs for emapalumab, which was acquired in August from Novimmune and targets rare disease primary haemophagocytic lymphohistiocytosis (HLH), a cytokine storm syndrome. The drug is also being studied in immune-oncology, where cytokine storms and secondary HLH are common side effects of some treatments. The drug should receive FDA approval in November 2018 and European regulatory approval in 2019. Swedish Orphan Biovitrum sees potential peak sales between SEK 2.5-3 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.
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.
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