Company Reports

Wide-moat Sartorius and its bioprocessing subsidiary Sartorius Stedim Biotech, or SSB, reported first-quarter earnings that were a modest disappointment to us, with revenue mildly lower than our forecast. However, we continue to see early signs of recovery in the order books, and think that the company is still on track to meet its full-year guidance. We are maintaining our fair value estimates of EUR 295 per Sartorius AG preference share and EUR 240 per SSB share, and we view the current prices as slightly cheap with a slight preference for SSB.

Wide-moat companies Sartorius AG and its bioprocessing subsidiary Sartorius Stedim Biotech, or SSB, reported preliminary full-year results that were slightly below expectations. More significantly, the companies provided midterm guidance out until 2028 that were in line with expectations. We maintain our fair value estimates of EUR 295 per Sartorius AG preference share and EUR 240 per SSB share, and view the current prices as fairly valued.

We are transferring coverage of Sartorius AG and its bioprocessing subsidiary Sartorius Stedim Biotech, or SSB. We maintain our wide moat ratings for both companies due to the high regulatory hurdles of validated biomanufacturing and Sartorius’ excellent reputation for single-use technologies. However, we are reducing our fair value estimates on both companies due to our higher long-term cost of sales assumptions. For Sartorius AG, we revise our fair value downward to EUR 295 per preference share from EUR 315 previously. For SSB, we revise our fair value to EUR 240 per share from EUR 287.

Sartorius Stedim Biotech, the bioprocess subsidiary of Sartorius AG, is a leading provider of single-use biopharmaceutical fermentation and fluid management solutions. Sartorius performs consultations and custom installations of biomanufacturing systems for its drugmaker clients, which include bioreactors, filtration and purification systems, and cell analysis systems. This equipment has high disposable consumable requirements, including single-use bioreactor bags, filters, tubes, and containers. The company’s proven expertise in single-use technology, or SUT, and the regulation-validated nature of biomanufacturing gives Sartorius an attractive razor-and-blades model and supports a wide economic moat.

Sartorius AG and Sartorius Stedim Biotech’s third-quarter 2023 results were largely in line with expectations, and we are making no changes to our fair value estimates. Shares for both wide-moat companies currently look slightly undervalued, after falling due to last week’s update on preliminary third-quarter results and lowered full-year guidance. We believe it may be a good opportunity for investors to obtain shares at a discounted price, given that Sartorius reported seeing signs of recovery late in the third quarter. Order intake started improving toward the end of the third quarter, suggesting declines hit a floor in the second quarter and showed signs of recovery in the bioprocessing business, albeit at a slow pace. Shares are up slightly on these trends. However, uncertainty from macroeconomic and geopolitical factors remains elevated, and a full recovery in demand may be gradual heading into 2024.

Management for wide-moat companies Sartorius AG and its bioprocessing subsidiary, Sartorius Stedim Biotech, reduced full-year fiscal 2023 guidance and announced preliminary third-quarter results that showed softness. After adjusting our forecasts to incorporate the weaker full-year expectations, we are maintaining our fair value estimates for both firms. Macroeconomic headwinds, uncertainty around investments by biopharmaceutical customers, and tough comparable periods may plague the firm for longer than previously expected, and this is the second time this year management has lowered full-year guidance due to these factors. Nevertheless, longer-term growth drivers for the Sartorius companies remain sound, in our opinion, and if shares decline substantially on this news, we think investors may want to view that as an opportunity to invest in strong life science with stellar long-term prospects.

Second-quarter results for wide-moat companies Sartorius AG and its bioprocessing subsidiary, Sartorius Stedim Biotech, came in about as expected after a preliminary announcement last month. We already adjusted our near-term forecasts after management lowered full-year guidance in June, as the softening demand after the pandemic-era buildup weighed on sales for longer than management initially anticipated. However, on the call, management highlighted visibility into an expected rebound in orders later in 2023. Since we already saw this weak demand as temporary after the June update, we plan to maintain our fair value estimates. The potential for demand to rebound later this year sent share prices up for both names, which now appear to be trading in roughly fair territory.

Management at wide-moat companies Sartorius AG and its bioprocessing subsidiary Sartorius Stedim significantly reduced 2023 guidance, as demand for their life science tools have softened in the wake of small biopharmaceutical funding concerns, general macroeconomic uncertainty, and tough comparable periods in which some purchases may have been pulled forward. Considering those factors, we have significantly reduced our near-term assumptions and are reducing our fair value estimates on both companies by the mid-single digits on a percentage basis. While shares of both firms were trading in roughly fair territory prior to this announcement, we suspect they may decline substantially on this news. If shares wind up trading at significant discounts to our new fair values, we think investors with a long-term horizon may see such weakness as an opportunity to obtain shares in these growth companies at reasonable prices.

Sartorius Stedim Biotech, the bioprocess subsidiary of Sartorius AG, is a leading provider of single-use biopharmaceutical fermentation and fluid management solutions. It offers services ranging from early-stage consultancy to commercial-scale equipment. After an initial period of consultation and customer-partnered engineering work, Sartorius does custom installation of biomanufacturing systems for its customers, consisting of bioreactors, fermenters, and cell analysis systems. This equipment has high disposable consumable requirements because customized filters are often used for disinfection due to the sensitivity of biochemical processes. The company’s proven expertise in single-use technology and the regulation-validated nature of biomanufacturing gives Sartorius an attractive razor/razor blade model.

Wide-moat Sartorius Stedim (Sartorius Ag's bioprocess subsidiary) revealed a tough start to 2023, as previous COVID-19 tailwinds turned into headwinds. Management maintained its guidance for 2023, though. And while we have tinkered with our near-term assumptions, these minor changes did not materially affect our EUR 306 fair value estimate.

Sartorius Stedim Biotech, the bioprocess subsidiary of Sartorius AG, is a leading provider of single-use biopharmaceutical fermentation and fluid management solutions. It offers services ranging from early-stage consultancy to commercial-scale equipment. After an initial period of consultation and customer-partnered engineering work, Sartorius does custom installation of biomanufacturing systems for its customers, consisting of bioreactors, fermenters, and cell analysis systems. This equipment has high disposable consumable requirements because customized filters are often used for disinfection due to the sensitivity of biochemical processes. The company’s proven expertise in single-use technology and the regulation-validated nature of biomanufacturing gives Sartorius an attractive razor/razor blade model.

Sartorius Stedim Biotech, the bioprocess subsidiary of Sartorius AG, is a leading provider of single-use biopharmaceutical fermentation and fluid management solutions. It offers services ranging from early-stage consultancy to commercial-scale equipment. After an initial period of consultation and customer-partnered engineering work, Sartorius does custom installation of biomanufacturing systems for its customers, consisting of bioreactors, fermenters, and cell analysis systems. This equipment has high disposable consumable requirements because customized filters are often used for disinfection due to the sensitivity of biochemical processes. The company’s proven expertise in single-use technology and the regulation-validated nature of biomanufacturing gives Sartorius an attractive razor/razor blade model.

Wide-moat Sartorius Stedim (Sartorius Ag's bioprocess subsidiary) delivered solid fourth-quarter results, and although order intakes continued to decline year over year, the company still reported revenue growth in the lower band of management’s 2022 full-year guidance, slightly below our expectations. Also, Sartorius Stedim discussed increasing its 2025 sales revenue associated with price increases due to inflation, and we plan to increase our long-term projections and fair value estimate moderately as a result.

Wide-moat Sartorius Stedim (Sartorius Ag's bioprocess subsidiary) delivered solid third-quarter results, but weak order trends, economic challenges, and an increase in the company's cost base suggest a deceleration in growth is coming, which is in line with our long-term forecast. We may adjust our short-term operating expectations slightly, but at first glance, we will likely maintain our EUR 290 fair value estimate.

Sartorius Stedim Biotech, the bioprocess subsidiary of Sartorius AG, is a leading provider of single-use biopharmaceutical fermentation and fluid management solutions. It offers services ranging from early-stage consultancy to commercial-scale equipment. After an initial period of consultation and customer-partnered engineering work, Sartorius does custom installation of biomanufacturing systems for its customers, consisting of bioreactors, fermenters, and cell analysis systems. This equipment has high disposable consumable requirements because customized filters are often used for disinfection due to the sensitivity of biochemical processes. The company’s proven expertise in single-use technology and the regulation-validated nature of biomanufacturing gives Sartorius an attractive razor/razor blade model.

Wide-moat Sartorius Stedim (Sartorius AG’s bioprocess subsidiary) had an overall good first quarter and stayed on track to generally meet our targets. We are slightly adjusting our short-term expectations, though our long-term forecasts are unchanged, and we maintain our EUR 290 fair value estimate.

Sartorius Stedim Biotech reported first-quarter earnings that largely met our expectations, and we maintain our EUR 290 fair value estimate and wide moat rating.

Wide-moat Sartorius Stedim Biotech--Sartorius AG’s bioprocess subsidiary--generally met our expectations in the fourth quarter, with revenue coming in near our forecast (and FactSet consensus), although EBITDA and EPS slightly exceeded our forecasts. We are maintaining our EUR 290 fair value estimate. While shares remain overvalued in our view, the stock has recently been trading at a more reasonable valuation than the sky-high multiples reached over 2020 and most of 2021.

Sartorius Stedim Biotech, the bioprocess subsidiary of Sartorius AG, is the leading provider of single-use biopharmaceutical fermentation and fluid management solutions. It offers services ranging from early-stage consultancy to commercial-scale equipment. After an initial period of consultation and customer-partnered engineering work, Sartorius does custom installation of biomanufacturing systems for its customers, consisting of bioreactors, fermenters, and cell analysis systems. This equipment has high disposable consumable requirements because customized filters are often used for disinfection due to the sensitivity of biochemical processes. The company’s proven expertise in single-use technology and the regulation-validated nature of biomanufacturing gives Sartorius an attractive razor/razor blade model.

Most medical technology and device companies under our coverage have economic moats, but attractive valuations are hard to find, and the sector trades at an average price/fair value estimate of 1.33.