Israeli Pharma Firm Rafa Gets Buy Rating, 45% Upside Target

Investment firm Leader has initiated coverage of pharmaceutical company Rafa Laboratories with a buy recommendation and a price target of NIS 24 per share. This represents a potential upside of approximately 45% from the stock's trading price of NIS 16.5 at the time of the analysis, valuing the company at around NIS 1.68 billion.

Leader's analysis projects Rafa's net profit to reach NIS 120-130 million in 2026 and NIS 150-170 million in 2027, up from an estimated NIS 100 million in 2025. The firm anticipates Rafa's revenues could grow to approximately NIS 968 million by 2032, nearly evenly split between its two main business segments: pharmaceuticals and biodéfense.

The pharmaceutical division, which accounts for about 63% of revenues, includes over 100 products across eight medical areas. The biodéfense segment, though smaller in revenue (37%), is more profitable and focuses on auto-injectors for emergencies and defense against unconventional threats. Leader expects a wave of new pharmaceutical product launches, potentially generating NIS 150-250 million in annual sales within four years, to drive growth.

Growth is also expected from Rafa's 40% stake in Exceed, acquired in 2022, which markets orphan drugs in Central and Eastern Europe. Exceed's revenues have surged, and it became profitable in late 2023. Rafa has the option to increase its stake in Exceed to 60% in 2027, which would lead to Exceed's financials being consolidated into Rafa's reports. Leader estimates Exceed's contribution to Rafa's valuation at around NIS 130 million.

In biodéfense, Rafa supplies governments and security agencies globally, including in the US, Germany, Australia, and Canada. The company plans to significantly increase its auto-injector production capacity from 1.2 million units annually to 3 million by the end of 2027. Development is underway for TXA, a product for severe bleeding with potential US government funding, and an auto-injector for naloxone to treat opioid overdoses, which is nearing US FDA approval for a potential 2027 launch.

Leader notes potential risks including approval delays, reliance on government procurement budgets, and shifts in order and delivery schedules. Leader previously provided underwriting services for Rafa's public offering.