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 AG is a leading provider of single-use biopharmaceutical fermentation and fluid management solutions. It offers products and services for life science labs and bioprocessing. For bioprocessing, 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 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 performs 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 because of 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 and supports its wide economic moat.

Life science toolmakers that enable drug production operate attractive businesses for two major reasons that investors often find compelling. First, regulation of the drug manufacturing process creates highly durable switching costs for end users and long potential revenue streams for life science toolmakers. Second, life science firms often benefit from broad exposure to biopharmaceutical growth without taking on much product-specific risk.

Wide-moat Sartorius AG saw a tough start to 2023, as previous COVID-19 tailwinds turned into headwinds relative to the year-ago period, especially in its bioprocessing Sartorius Stedim arm. Management maintained its guidance for 2023. And while we have tinkered with our near-term assumptions, these minor changes did not materially affect our EUR 327 fair value estimate.

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 performs 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 because of 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 and supports its wide economic moat.

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 performs 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 because of 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 and supports its wide economic moat.

Wide-moat Sartorius AG delivered solid fourth-quarter results, and although macroeconomic uncertainty remains high, Sartorius was still able to reach the lower band of its 2022 full-year guidance. Also, Sartorius increased its 2025 sales target due to price increases, and as a result, we plan to increase our long-term projections and fair value estimate in the low double digits on a percentage basis.

Wide-moat Sartorius AG delivered solid third-quarter results, although order trends, economic headwinds, and an increase in the company's cost base suggest future performance may weaken from the heady results of recent years. Shares in Sartorius AG declined 18% on this news. However, they still remain moderately above our fair value estimate, which we will likely not change since the 2022 outlook remains in line with our short-term expectations and our long-term view remains unchanged.

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 performs 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 because of 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 and supports its wide economic moat.

Wide-moat Sartorius had an overall good first quarter considering changing economic conditions and challenging comparables. We are slightly adjusting our short-term expectations, though our long-term forecasts are unchanged, and we maintain our EUR 267 fair value estimate. Shares are overvalued at current levels.

Sartorius reported first-quarter results that largely met our expectations, and we maintain our EUR 267 fair value estimate and wide moat rating.

Wide-moat Sartorius moderately exceeded our expectations in the fourth quarter, and we are increasing our fair value estimate to EUR 267 from EUR 250 to reflect the strong results and our view that that the U.S. corporate tax rate is likely to remain at 21%. Shares remain significantly overvalued in our view.

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 performs 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 because of 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 and supports its wide economic moat.