Edison Investment Research Limited

London, UK, 12 July 2017

Edison issues initiation on Laboratoris Farmacéuticos ROVI (ROVI)

ROVI, a profitable, speciality healthcare company, markets ~30 proprietary and in-licensed products across nine core franchises mainly in its domestic Spanish market. ROVI is at a major inflection point; its internally developed biosimilar enoxaparin could be first to launch in key European markets (launch expected end 2017), transforming the sales growth and operating margins of the business. ROVI has a strong presence in the Spanish heparin market (and select international markets through partners), where it has been manufacturing and marketing its flagship product Hibor (second-generation LMWH) since 1998. Other top-line drivers include further product in-licensing and the potential launch (2021) of Risperidone-ISM (schizophrenia). We value ROVI at EUR1.0bn (EUR20.1/share).

We value ROVI at EUR1.0bn or EUR20.1 per share based on a three-stage DCF, forecast to 2025, at a 10% discount rate, a long-term tax rate of 15% and a 2.0% terminal growth rate. Our valuation is underpinned by the sales potential of biosimilar enoxaparin and the base business retaining stable low single-digit growth rates from further in-licensing deals. A stable dividend with a three-year average 33% pay-out ratio additionally adds value.

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