On Monday, Orion Oyj (ORNBV:FH) (OTC: ORINY) saw a downgrade in its stock rating by a Jefferies analyst, shifting from Hold to Underperform. Accompanying this downgrade, the price target was also lowered to EUR28.00 from the previous EUR35.00.
The analyst expressed concerns over the company's reliance on the sales of its Nubeqa drug, which is projected to account for over 50% of the discounted cash flow (DCF). The forecasted compound annual growth rate (CAGR) for sales from 2024 to 2028 is only 3.2% when Nubeqa is excluded.
The analyst highlighted impending challenges for Nubeqa, particularly the introduction of generic versions of Xtandi in 2028, which could hinder growth. Additionally, the US patent for Nubeqa is set to expire in 2033, introducing further potential risks. The commercial prospects for other Orion products, such as ODM-111 and '105, are also under scrutiny due to competitive and market pressures.
Orion's valuation was another point of concern, as it currently stands at around 20 times the 2024 price-to-earnings (P/E) ratio. This is notably higher than the sector average, which is approximately 17 times for a 23% earnings per share (EPS) compound annual growth rate (CAGR) from 2023 to 2026. Moreover, Orion's dividend yield was reported to be lower than that of the local index, adding to the analyst's reservations about the stock's current valuation.
The downgrade and revised price target reflect the analyst's view on the potential headwinds facing Orion's growth and profitability in the coming years.
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