Banc Sabadell | From the meeting held by the management of Laboratorios Rovi (ROVI) to explain the acquisition of a CDMO plant in the United States, we highlight the following messages:
- They do not expect the CDMO plant to be accretive to earnings for a couple of years, but they do expect a significant increase in profitability with the entry of new customers in the pre-filled syringe line. In any case, the minimum turnover of $50 million agreed with BMS will cover costs during the first few years.
- The short-term objective is to attract new customers for the pre-filled syringe line, and they believe that demand for CDMO services in the United States will grow significantly with tariffs on pharmaceutical products. In the medium term, the objective is to continue expanding capacity with new lines to take advantage of the high operating leverage of the business.
- Regarding the price paid for the factory, it confirms that assuming an investment of less than <1% of capitalisation (<€29 million) is a good approximation.
- It confirms that the new line of pre-filled syringes (65-70 million syringes) will require additional capex of around $20-30 million and estimates that once operational, it could easily exceed $100 million in sales (~8.5% of ROVI’s sales in 2027e).
Assessment: We continue to believe that the operation is a good strategic fit, as it will allow ROVI to enter the US market with a limited investment at a time when the tariffs imposed by the Trump administration will favour the production of medicines in this region. The new CDMO plant offers an attractive opportunity for profitable growth and, in our opinion, the key will be its ability to secure contracts with new customers that will allow it to maximise the capacity of its production lines. The share price rose yesterday by 2.65% (1.1% against IBEX).
