Sobi: Raising Our Moat Rating to Narrow as Portfolio Grows and Diversifies

We’re raising our moat rating for Sobi from none to narrow after a reassessing the firm’s long-term competitive advantages. We had previously been concerned about the firm’s reliance on factor replacement therapies in hemophilia for its long-term growth prospects, but a series of targeted acquisitions in hematology and immunology have helped diversify revenue, extend duration of patent protection, and support long-term growth. In hemophilia, the upcoming launch of once-weekly hemophilia product Altuviiio in Europe is also likely to extend Sobi’s growth in this market. We think the firm has an interesting niche in rare disease markets, which means it doesn’t require high spending to support manufacturing or a large primary care-focused salesforce, and it can find affordable acquisition targets that might be too small to interest its larger biopharma peers. We’ve also lowered our assumed cost of equity for Sobi from 9% to 7.5%, as we think the firm’s lengthening track record of profitability reduces its reliance on capital markets and contributes to its below-average systematic risk. After upgrading Sobi’s moat and lowering its cost of equity, we’ve raised our fair value estimate to SEK 343 from SEK 252, and we now see shares as slightly undervalued.