Key Takeaways:
- US Market Entry: ROVI is transforming into a global player by acquiring a manufacturing facility in Phoenix, Arizona, from Bristol-Myers Squibb, securing a foothold in the world’s largest pharma market.
- Price Projection: Our model projects the stock could climb to €90 per share by December 2027.
- Expected Returns: This target implies a solid 14.9% annualized return, positioning the stock as a “Buy” for investors willing to look past a transitional 2025.
- Capacity Boost: The company is rebranding its contract manufacturing business to ROIS and installing a new “Optima Line” in the U.S. that will add capacity for 65-70 million pre-filled syringes per year.
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Laboratorios Farmaceuticos ROVI (ROVI), the Spanish pharmaceutical company, reported a 7.9% drop in revenue over the last twelve months as pandemic-related sales normalized and heparin sales faced headwinds. However, management is executing a bold pivot to growth.
The headline story is the acquisition of a manufacturing plant in Phoenix, Arizona. This isn’t just a building; it comes with a 5-year supply agreement with Bristol-Myers Squibb (BMS), guaranteeing a minimum payment of $50 million per year. This deal de-risks the entry into the U.S. market while ROVI prepares for its next phase of expansion.
With the stock trading at €68.45, the market seems to be pricing in the short-term revenue dip while ignoring the massive long-term potential of its new U.S. footprint.
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What the Model Says for ROVI Stock
We evaluated ROVI’s potential through 2027, factoring in the recovery of its CDMO business and the margin accreditation from high-value injectables.
Our model signals a “Buy.” Using a forecast of 8.2% Revenue Growth (CAGR) and 26.7% Operating Margins, the model projects the stock could reach €90 by the end of 2027.
This implies a 14.9% annualized return over the next two years.
This return profile is attractive. It suggests that once the market digests the 2025 transition, the valuation will re-rate to reflect ROVI’s status as a high-quality global CDMO player.
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Our Valuation Assumptions
TIKR’s Valuation Model lets you plug in your own assumptions for a company’s revenue growth, operating margins, and P/E multiple, and calculates the stock’s expected returns.
Here’s what we used for ROVI stock:
1. Revenue Growth: 8.2%
2025 will be challenging, with management guiding for a mid-single-digit decrease in operating revenue. This is due to a decline in the LMWH (heparin) division and the transition period for the CDMO business.
However, the future is bright. The new ROIS brand (ROVI’s CDMO division) is positioning itself as a top-3 global player in injectables. The new Phoenix facility provides ample room for expansion, with 80,000 square meters of land available for future growth.
We forecast a bullish 8.2% CAGR through 2027. This accounts for the dip in 2025 followed by a strong recovery as new capacity comes online and the U.S. sales team ramps up.
2. Operating Margins: 26.7%
High-value products drive profitability.
Despite lower revenues, margins remain robust. The LTM Gross Margin stands at 62.4%, indicating strong pricing power.
The shift toward high-potency products (like those to be manufactured in the new Phoenix state-of-the-art facility) supports higher margins. Management noted the new site has “cytotoxic area approved by the FDA,” enabling them to handle complex biologic products.
We project operating margins to expand to 26.7%, as the high-fixed-cost base of the new plant gets absorbed by the guaranteed BMS volumes and new third-party contracts.
3. Exit P/E Multiple: 19.7x
ROVI currently trades at roughly 13.5x earnings. This is a discount relative to pure-play CDMO peers, largely due to its hybrid business model and European focus.
Our model assumes an exit multiple of 19.7x by 2027.
We believe this re-rating is justified. As ROVI proves its ability to operate successfully in the U.S. and transforms into a “truly global contract development and manufacturing organization,” the market should award it a higher multiple consistent with high-growth pharma services companies.
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What Happens If Things Go Better or Worse?
The thesis hinges on the successful execution of the U.S. strategy (these are estimates, not guaranteed returns):
- Low Case: If the U.S. integration hits snags or heparin sales collapse further, returns could drop to a meager 11.8% annual return.
- Mid Case: If the recovery proceeds steadily without massive multiple expansion, we project a solid 18.5% annual return.
- High Case: If the “Optima Line” fills up faster than expected and the market fully re-rates the stock, returns could reach an impressive 24.5% annual return.
See what analysts forecast for the next 5 years for ROVI stock (Free with TIKR) >>>
How Much Upside Does ROVI Stock Have From Here?
With TIKR’s new Valuation Model tool, you can estimate a stock’s potential share price in under a minute.
All it takes is three simple inputs:
- Revenue Growth
- Operating Margins
- Exit P/E Multiple
If you’re not sure what to enter, TIKR automatically fills in each input using analysts’ consensus estimates, giving you a quick, reliable starting point.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
