Grifols Earnings: Solid Immunoglobulin Demand and Cost Savings Support a Return to Financial Health

We’re maintaining our Grifols class B fair value estimates at $12.20/EUR 11.10 following second-quarter results that reflect solid demand for the firm’s plasma products, particularly the most profitable immunoglobulin products. Grifols saw 8.8% constant currency sales growth in the second quarter, with 10% growth in the biopharma business, which encompasses the firm’s plasma-derived protein therapies. Within biopharma, Grifols is seeing double-digit growth in its immunoglobulin business, particularly for its new, more profitable subcutaneous option Xembify, and we think the firm is smart to focus on further penetration of the immunodeficiency markets, where competition remains light. Firms like Argenx and UCB are already gaining approval in autoimmune diseases where immunoglobulin has been historically used, and while they are still competing in a relatively small segment of Grifols’ market, we expect this competition could gradually spread across roughly 40% of Grifols’ market if approvals extend from myasthenia gravis into ITP and CIDP (Argenx’s Vyvgart could launch in both indications by 2025). The prospects for this emerging competition have kept our moat rating for Grifols at narrow, although we still think the immunodeficiency market (roughly half of Grifols’ total immunoglobulin market) and other plasma-derived proteins like albumin and alpha-1 have better long-term prospects for Grifols to maintain its competitive advantages. That said, we think Grifols needs to continue to make progress with innovation in its pipeline, as less-innovative formulation changes still dominate the late-stage pipeline, with more novel drug candidates mostly in earlier stages of development. We’re closely watching for progress with Biotest’s pipeline, which should result in Fibrinogen approval as well as potential data for Cytotect and Trimodulin in 2024.