Moberg Pharma AB: A Royalty on an Innovative Treatment for a Condition Affecting Hundreds of Millions of People Globally
Moberg Pharma, an obscure Swedish microcap, offers a potential homerun investment due to its development of an innovative treatment for onychomycosis (nail fungus).
Introduction
Moberg is an interesting opportunity and represents a significant divergence from my usual investment ideas. I usually like to invest in large, very high-quality businesses with long operating histories that have become mispriced due to a change in short-term sentiment, perhaps due to some significant but temporary and fixable problem within the business. My investment in Meta in 2022 is an example of just such an investment.
Moberg, on the other hand, has not even officially reported revenue from its current product, MOB-015. It is, in that respect, somewhat speculative because there is a high degree of uncertainty concerning the outcome of certain key events that will determine the business’s future and the extent to which it becomes a winner.
I’d like to introduce this write-up with a quote from Warren Buffet which encapsulates the way that I think about the investment opportunity that Moberg represents:
“If only one variable is key to a decision, and the variable has a 90% chance of going your way, the chance for a successful outcome is obviously 90%. But if ten independent variables need to break favourably for a successful result, and each has a 90% probability of success, the likelihood of having a winner is only 35%. … Since a chain is no stronger than its weakest link, it makes sense to look for – if you’ll excuse an oxymoron – mono-linked chains.”
Moberg is not a “mono-linked chain”. There are a number of significant events with independent probabilities that will dictate the degree to which this opportunity becomes a winner. The probabilities of these independent events turning out favourably are, in some cases, capable of estimation and appear favourable. In other cases, however, they are completely incapable of estimation, partly due to my personal limitations, and partly due to presently available information.
Nevertheless, I still think that the expected value of the Moberg investment opportunity is quite high, even if it is hard to estimate, given that the magnitude of the potential payoff is so high. There is a range of potential outcomes, hence the very wide distribution of potential valuation outcomes that I posit later on in this write-up.
So, what am I trying to say with these introductory remarks? My overarching point is that Moberg is by no means a cinch and any prospective investment in the company should seriously consider the possibility of permanent loss of capital, notwithstanding the potential mitigating factors providing a margin of safety which I refer to later. There’s a lot that can go wrong.
That being said, I hope you enjoy reading about this company as much as I have enjoyed researching and writing about it. As always, you must think critically about the facts presented here, conduct your own research to verify information, and do your own do diligence. To assist you, I have attached a copy of a bibliography containing my research sources at the end of this write-up. I hope it helps. Happy hunting.