Swedish Orphan Biovitrum: Reducing Our Uncertainty Rating to Medium

We’re lowering our Morningstar Uncertainty Rating for Swedish Orphan Biovitrum to Medium from High. 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. Sobi's revenue concentration from its hemophilia drugs has already declined from a peak of 60% in 2018 to 40% in 2023, and we expect it to fall to the mid-30s in the future. New products like long-acting hemophilia drug Altuviiio (launching in Europe in 2024), gout drug SEL-212 (launching in 2025), and myelofibrosis drug Vonjo should help drive sales and profit growth over the next several years. We maintain our SEK 343 fair value estimate and narrow moat rating for the firm, and we think shares look slightly undervalued at recent prices.