Gubra (One pager): Obesity Market Upgrade Enhances DCF Estimates

Gubra’s share price has risen by nearly 300% year-to-date, driven by growing investor interest in the obesity sector and increasing awareness of Gubra’s obesity focus within its Discovery & Preclinical (D&P) business.

From an investment perspective, Gubra offers investors a unique risk and return profile by combining 1) A high growing and positive cash flow- generating CRO business benefitting from the trend of pharma companies increasingly outsourcing CRO services, with CRO market spending forecast to grow at 11% CAGR 2026[1]), and 2) A high-reward traditional drug discovery activity in its D&P business. The CRO segment’s positive cash flows support its D&P activities with additional synergies from knowledge and resource exchange. Gubra’s D&P segment are developing pipeline candidates with partners with significant future milestones and royalty potential, as well as its own two (non-partnered) obesity product candidates Amylin-analog based GUBamy and UCN2 (targeting ‘healthy weight loss’). They can both act as stand-alone products or products used in combination with other obesity products – or even be combined with each other.

Following its Q2 2024 report, Gubra upgraded its full-year guidance, raising expectations for 2024 organic revenue growth to 23-28% (up from 15-20%) and its EBIT margin to 29-32% (from 28-31%).

We have revised our DCF-model, guided by the company, to reflect new estimates for the total obesity market in 2030. With the current share price in line with our latest one-pager from June 2024, the model indicates a lower probability og success (PoS) in the base case.

Strong growth in Gubra’s CRO business, primarily fueled by obesity-related projects, reinforces the belief that Gubra’s early-stage pipeline may have a competitive edge from a medical innovation perspective. This advantage could allow the company to capture a larger market share than previously assumed in the DCF model, even as Gubra and its partners are set to enter what is anticipated to be a highly competitive and crowded obesity marketplace.

Disclaimer: HC Andersen Capital receives payment from Gubra for a Digital IR/Corporate Visibility subscription agreement. /Claus Thestrup 3:45 PM 09-09-2024.