Specialized CRO Models Will Expand Drug Discovery Amid Uncertainty

Key Takeaways

• Expansion of proprietary peptide pipeline and major partnerships diversify revenue streams and enhance earnings resilience beyond core CRO services.
  
• Investments in advanced preclinical platforms and global reach position Gubra to capture a larger, higher-margin market as outsourcing in biotech grows.
  
• Heavy reliance on volatile markets, concentrated revenue sources, and traditional services exposes Gubra to profitability risks amid funding constraints, geographic limits, and evolving alternatives.

Catalysts

A biotech company, focuses on the pre-clinical contract research and peptide-based drug discovery within metabolic and fibrotic diseases in Europe, North America, and internationally.

• The rising global prevalence of obesity, diabetes, and related metabolic diseases is expanding the pipeline of drug development projects, supporting sustained long-term demand for Gubra's specialized CRO and Discovery & Partnerships services-positioning the company for resilient revenue growth despite near-term CRO market softness.
  
• The ongoing industry shift toward outsourcing R&D to specialized, data-driven CROs is likely to boost Gubra's addressable market over time; Gubra's investments in advanced preclinical models and proprietary platforms position it to capture a greater share of higher-margin, complex research projects, which should enhance both revenue and future net margins.
  
• Expansion and clinical advancement of the proprietary peptide pipeline (Amylin/GUBamy, UCN2) creates meaningful optionality for future milestone payments, licensing income, and potential royalties; these flows can meaningfully supplement and diversify earnings away from cyclical CRO service revenue.
  
• Recent major partnership and upfront payment from AbbVie (Amylin/GUBamy) demonstrate validation of Gubra's drug discovery capabilities and business model, while positive early human trial data could catalyze additional partnerships, driving lumpier but higher long-term earnings and cash flow potential.
  
• Strategic moves to broaden geographic reach into the U.S. and Asia-Pacific-and new service offerings (e.g., women's health)-should diversify the client and revenue base, reduce exposure to single-market downturns, and incrementally enhance topline growth and operating leverage over the long run.

Gubra Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Gubra's revenue will decrease by 54.0% annually over the next 3 years.
• Analysts assume that profit margins will increase from 66.2% today to 73.4% in 3 years time.
• Analysts expect earnings to reach DKK 188.4 million (and earnings per share of DKK 40.71) by about September 2028, down from DKK 1.7 billion today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 49.8x on those 2028 earnings, up from 3.8x today. This future PE is greater than the current PE for the DK Life Sciences industry at 28.6x.
• Analysts expect the number of shares outstanding to grow by 0.23% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 5.27%, as per the Simply Wall St company report.

Gubra Future Earnings Per Share Growth

Risks

• Macro-driven funding constraints in the U.S. market, particularly affecting small biotechs and academia, have already led to a 2% decline in CRO revenue in the first half of 2025 and a downward revision of full-year guidance; prolonged weakness in biotech capital availability presents an ongoing risk to revenue growth and overall earnings, given Gubra's material exposure to this segment.
  
• Despite a strong proprietary pipeline and major partnership deals, Discovery & Partnerships revenue remains "lumpy," highly dependent on successful milestone achievements, upfront payments, and partners' decisions (e.g., AbbVie controls GUBamy development); this dependence increases volatility in revenue and earnings, potentially impacting the stability needed for consistent share price appreciation.
  
• Expansion into new service areas (like women's health) requires upfront investment in personnel and capabilities, which has contributed to lower EBIT margin guidance for the CRO segment (revised to around 20% from a previous 25–31%); should these investments not yield sufficient incremental revenue, sustained margin compression may weigh on profitability and net incomes.
  
• The company's revenue base is still geographically concentrated, with U.S. and European markets dominating; limited penetration into Asia and reliance on the U.S. amplify exposure to regional economic or regulatory downturns, thereby increasing the risk of revenue stagnation and elevated earnings volatility.
  
• Growth in alternative preclinical technologies-such as organ-on-a-chip, computational drug discovery, and AI-based models-could erode demand for Gubra's core animal model services amidst increasing regulatory and ESG scrutiny of animal research, posing a long-term threat to both revenue and margin sustainability if Gubra cannot adapt or diversify in response.

Valuation

• The analysts have a consensus price target of DKK502.5 for Gubra based on their expectations of its future earnings growth, profit margins and other risk factors.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be DKK256.6 million, earnings will come to DKK188.4 million, and it would be trading on a PE ratio of 49.8x, assuming you use a discount rate of 5.3%.
• Given the current share price of DKK401.6, the analyst price target of DKK502.5 is 20.1% higher. Despite analysts expecting the underlying buisness to decline, they seem to believe it's more valuable than what the market thinks.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.