Grifols Earnings: Strong Third Quarter as Potential Private Equity Deal Still in Progress

We’re maintaining our EUR 10.90/$11.80 fair value estimates for class B (nonvoting) Grifols shares following third-quarter results that were relatively in line with our forecast. Grifols' sales grew 12.4% at constant currencies year over year, with 12.1% growth in the key biopharma segment and strong growth for immunoglobulins (16.6%), as demand for a newer subcutaneous version improved and Grifols gained market share, and for albumin (11.7%) due to demand in China. We think Grifols’ competitive advantages are being eroded by novel treatments, and we do not assign the firm an economic moat. In the near to midterm, however, we see solid growth prospects as competitors to the firm’s highly profitable immunoglobulin products work to expand their prescribing labels. Argenx’s Vyvgart is launching well in one of the key autoimmune indications for immunoglobulin—CIPD—but we expect sales erosion to be gradual given the strong efficacy of immunoglobulin and an expected slow switch rate.