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Grifols Poised to be One of the Fastest Growing Midcap Names in Biosceince

Grifols Poised to be One of the Fastest Growing Midcap Names in Biosceince

With underlying strong top-line growth trends and given the company s competitive position within the industry, we continue to believe Grifols will be one of the fastest growing midcap names in bioscience, delivering steady high-single-digit growth in revenues and double-digit earnings improvement.

Further, we see a number of catalysts (Alzheimer s, dividend) for the company in the next 12 months, which may provide further upside to the stock. Stock Thoughts and Valuation We have high confidence in our bullish investment thesis and remind investors that Grifols remains our top pick for 2014.

Given Grifols ongoing performance, industry dynamics, and synergy opportunities from the Novartis diagnostic acquisition, we believe Grifols will be able to meet or beat our estimates next year. Currently, shares of the U.S.-listed, nonvoting ADR (GRFS) trade at 16.1 times our new 2015 adjusted EPS estimate of $2.81 ( 2.06 converted at $1.3644 USD/EUR), which we view as an attractive entry point for a durable low- to midteens bottom-line grower. We rate the stock Outperform. Underlying revenue growth remains strong, with volumes up 5%-7%. Grifols is likely to grow above that rate as it takes share over the next several years.

In the short term, we believe second-quarter revenue growth will again come in below average on tough comps, but should reaccelerate in the second half of the year. 3. Management expanded on the Novartis diagnostic transaction and indicated that it sees numerous opportunities to take market share and expand geographically, as exemplified by the recent seven-year Japanese contract win ($50 million in 2015, adding 10% to our original growth rate estimate).

Grifols Poised to be One of the Fastest Growing Midcap Names in Biosceince