UBS has begun coverage of Ono Pharmaceutical Co., Ltd with a Buy recommendation and set a target price of JPY2,950.00. The research note underscores both opportunities and near-term headwinds for the company as it transitions through a period of revenue pressure tied to the patent expiry of a key product.
The bank points to the biopharma's current market performance as context for the call. InvestingPro data shows the stock trading close to its 52-week high, delivering a 40.35% return over the past year. InvestingPro's Fair Value model also indicates the shares may be undervalued at present.
UBS flagged a notable valuation of one of Ono's pipeline assets. The firm assigned a net present value of JPY157 per share to ONO-4578 and expressed a more optimistic outlook for this candidate than prevailing consensus estimates. UBS highlighted the potential for clinical data due at the American Society of Clinical Oncology conference in June to influence market sentiment around the drug.
Still, the analyst house expects financial pressure stemming from the patent cliff for Opdivo. UBS forecasts a core operating profit compound annual growth rate of -5% for fiscal years 2026-2033, reflecting the anticipated revenue decline tied to the loss of exclusivity for that product. Despite the projected drop in operating profit, Ono's cash generation and balance-sheet metrics remain constructive: the company shows a 9% free cash flow yield and a current ratio of 2.99, and carries moderate levels of debt.
In strategic moves to bolster commercial execution, UBS noted Ono's acquisition of Deciphera, which established a direct sales structure in Europe and the United States. The bank views that footprint as supportive of the company's effort to manage the transition away from Opdivo revenues. Ono's market capitalization stands at approximately $6.9 billion, and the company recorded 4% revenue growth over the last twelve months.
UBS assigned explicit value to pipeline progress while acknowledging forecasted near-term earnings pressure. The firm believes ONO-4578 will be a critical contributor to replacing Opdivo revenue and priced that potential into its valuation. Market participants may watch for the ASCO clinical readout in June as a trigger for sentiment shifts, per UBS.
Context note: InvestingPro data referenced in the UBS coverage indicates current share performance metrics and a Fair Value assessment. The investment bank's forecasts and asset-level valuation are reflected in its Buy rating and JPY2,950 target.