ICU Medical Earnings: Raising Fair Value Estimate on Better Margin Outlook From Otsuka Joint Venture

No-moat ICU Medical’s third-quarter results are in line with our expectations. Total revenue rose by 7% in constant currency to $580 million, maintaining the healthy growth momentum we saw from in the previous quarter. The company also announced a joint venture with Otsuka Pharmaceutical Factory to bolster its intravenous solutions business. Under the joint venture, ICU will provide commercial services and promote new IV solutions products from OPF to North American customers. According to the management, this deal could potentially bring 400-600 basis points of gross margin benefits to ICU upon its completion in 2025. We are encouraged by ICU’s efforts to improve its business mix, and we are raising our fair value estimate to $178 per share from $161 after incorporating the potential margin benefits from this joint venture.