Orion is a disciplined Finnish pharma whose economics are now dominated by darolutamide (Nubeqa): Bayer holds global commercial rights, Orion manufactures the product and collects an annually tiered royalty averaging ~25% of global sales — the highest annual tier was reached already in Q2 2026. H1-26 royalty income was €269.0M (+77% yoy) and Nubeqa product sales €381.8M (+64.9%), driving group sales +21.8% and LTM adjusted ROIC to 45.8% (EP +€489M).
The conservative base case must strip the lumps: the €180M Bayer milestone booked in Q4-25 was the LAST on that contract (~24% of LTM EBIT will not repeat from this source), and near-100%-margin royalties account for essentially all ex-milestone EBIT. This is a single-asset royalty concentration with a finite patent life — peak royalty growth (+77%) cannot be extrapolated, and Q4-26 comparables will be optically brutal.
The offsets are real but unquantified in today's numbers: the MSD/opevesostat agreement carries up to $30M development + $625M regulatory + $975M sales milestones plus low-double-digit-to-low-twenties royalties, Animal Health's Tessie is FDA-approved (partner launch mid-2027), and the balance sheet (gearing 0.2%, €161M of loans repaid in H1) can fund in-licensing. Pipeline optionality is the hedge against the cliff, not a substitute for it.
EV of €10.9bn is 18.4x LTM adjusted NOPAT of €592.7M; at the 8% WACC simple perpetuity math implies only ~2.4% growth. But normalise away the final €180M Bayer milestone and NOPAT is ~€449M — ~24x, ~3.7% implied perpetual growth — against a royalty stream that is still compounding fast but is single-asset with a finite exclusivity runway. The raised 2026 guide (sales €2,000-2,100M, EBIT €650-750M) puts the price at ~19.5x guide-midpoint NOPAT.
Base €82 (+6%): royalty ramp continues through 2027, absorbing the milestone drop, multiple held. Bull €100: opevesostat regulatory milestones begin landing and Nubeqa label extensions (ARASTEP/DASL-HiCaP) extend the runway — the market re-rates the royalty duration. Bear €56: US pharma tariffs bite, Nubeqa growth decelerates and the market starts pricing the patent cliff at a materially lower multiple.
The market pays today’s enterprise value for roughly 3.6% NOPAT growth over 5 years. The business earns 46% on capital against a 8% cost of capital (spread +37.8 pp); the no-growth value is €67/share (87% of price), so the rest is priced-in growth.
| Scenario | 24m target | Impl. g | Upside | Prob. | Driver |
|---|---|---|---|---|---|
| Bull | €100 | +10% | +29% | 25% | MSD milestones land + label extensions extend royalty runway; re-rate |
| Base | €82 | +5% | +6% | 45% | Royalty ramp absorbs milestone drop; multiple held |
| Bear | €56 | -5% | -28% | 30% | US tariffs + decelerating Nubeqa; market prices the patent cliff |
| Prob-weighted | €79 | — | +2% | 100% | Scenario-weighted expected value |
| WACC \ g | 0% | 3% | 5% | 8% | 10% | 15% |
|---|---|---|---|---|---|---|
| 6.50% | 92 | 104 | 113 | 127 | 138 | 168 |
| 7.25% | 78 | 88 | 95 | 107 | 115 | 139 |
| 8.00% (base) | 67 | 76 | 82 | 92 | 99 | 119 |
| 8.75% | 59 | 66 | 72 | 80 | 86 | 103 |
| 9.50% | 53 | 59 | 64 | 71 | 76 | 91 |
Green = fair value above the current price of €77.40. The reverse-DCF conclusion is dominated by WACC and growth — see the whole surface, not a single fair value.
⤓ Download the full model (.xlsx) — formula-driven sheets; flex the blue input cells and the model cascades in Excel.
~25% avg tiered royalty on global darolutamide sales; highest annual tier reached in Q2-26 — rate now works fully for Orion.
ARASTEP (BCR) and DASL-HiCaP readouts would widen the darolutamide population and extend the royalty runway.
Up to $1.63bn in future milestones plus tiered royalties — none of it in today's numbers.
Second leg growing +9.9% (H1); budesonide-formoterol +10.5% — diversification, if modest against the royalty engine.
Gearing 0.2%, €150M undrawn — room for in-licensing or bolt-ons to fill the post-Nubeqa gap.
Orion is a genuinely high-quality allocator — no APM, all R&D expensed, 45.8% adjusted ROIC, near-zero debt — riding a royalty stream still compounding at +77%. But the price already pays for that ramp (~24x ex-milestone NOPAT), the stream is one molecule with a finite life, and the last Bayer milestone is booked. HOLD, medium conviction; base €82 (+6%) over 24 months.
We would buy weakness: a tariff- or comparables-driven pullback toward the low-€60s would offer the royalty duration and the MSD optionality at a price that no longer assumes them.
Every adjustment traces to the cited note/page in the source filing — click to open it there. Annual report / 10-K: 📄 open
| Adjustment / figure | Value | Source | Why mttssn treats it this way |
|---|---|---|---|
| H1 2026 net sales 939.3 / operating profit 291.3 (LTM build) | 291 | Consolidated income statement, p.16 | LTM EBIT = FY25 631.6 - H1-25 182.5 + H1-26 291.3 = 740.4; flow items on LTM basis per streamlined method |
| FY2025 operating profit 631.6 (FY anchor) | 632 | Consolidated income statement, p.151 📄 p.151 | FY anchor for LTM arithmetic; profit 100% attributable to parent, no NCI |
| Balance sheet 30 Jun 2026: equity 1,268.9, IB debt 132.7, cash 130.2 | 1,269 | Consolidated statement of financial position, p.17 | IC built on latest interim BS snapshot, not FY anchor |
| Accumulated OCI +19.6 (CTA -6.7, pension remeasurement +26.3) | 19.6 | Consolidated statement of changes in equity, p.18 | OCI stripped from equity so IC reflects deployed operating capital, not FX/actuarial noise |
| EUR 180m Nubeqa milestone recognised in P&L Q4 2025 | 180 | Financial position and cash flow Jan-Jun 2026, p.5; milestone revenue 183.4 FY25 in Net sales by revenue flows, p.20 | Kept in NOPAT (milestones are a contractual pillar of the licensing model) but flagged: all Bayer milestones now recorded — none remaining; ~24% of LTM EBIT will not repeat from this source |
| Bayer contract: no remaining milestone payments; ~25% avg royalty on global Nubeqa sales | None | Key licensing and collaboration agreements, p.9 | Royalty stream (LTM royalties running at ~554m annualised from H1-26 269.0) is the durable earnings driver; milestones are exhausted on this contract |
| Russia subsidiary liquidation expense 3.3 (CTA recycling) | 3.3 | Financial results April-June 2026, p.4-5 | Non-cash accounting reclass of historical FX from OCI to opex on final liquidation of an exited business — added back pretax |
| R&D policy: internal development costs NOT capitalised | 0 | Note 3.1 Accounting policies — Research and development costs 📄 p.166 | Orion expenses all internal R&D (FY2025: 210.4m); no capitalization reversal needed — conservative accounting matches mttssn preference |
| Goodwill 87.2 (Inovet 73.7 + Farmos 13.5), no impairment | 87.2 | Note 3.1 Goodwill / impairment testing 📄 p.168 | Modest goodwill (7% of equity) for the sector; FY2025 total impairments only 0.4m vs 41.4m in 2024 |
| Intangible assets not yet in use 58.8 | 58.8 | Note 3.1 — carrying amount of intangibles not yet available for use 📄 p.168 | Capitalised external upfront/milestone payments to collaborators carry write-down risk if projects fail — watch item, no adjustment |
| Pension plans in net surplus (fund asset -12.8, other liability +2.6) | 2.6 | Note 4.2 Pension assets and pension liabilities 📄 p.179 | Only the 2.6 liability treated as debt-like in IC; Finnish fund surplus stays as BS asset; net interest immaterial — no NOPAT reclass |
| Lease liabilities 14.6 at 12/25 embedded in IB debt | 14.6 | Note 6.4 Interest-bearing liabilities (9.4 non-current + 5.2 current) 📄 p.191 | Leases peripheral (premises/cars); kept inside reported IB debt since interim discloses no split — ~1% of IC, conservative |