Euroapi Micronization (photo credit: Euroapi / Fabien Malot)
(AOF) – Euroapi generated net income of 62.8 million euros in the first half of 2023 compared to 16.7 million euros in the first half of 2022, including 46.8 million euros in tax income deferred charges linked to the revaluation of the assets of Euroapi Hungary. However, over this period, its EBITDA fell from 60.8 million euros to 52.1 million euros. Core EBITDA stood at €62.5 million, down 11.1% compared to €70.3 million in the first half of 2022.
The Core EBITDA margin stood at 12.6% of revenue compared to 14.5% in the first half of 2022.
Operating profit was €16 million, compared to €26.1 million in the first half of 2022.
Its turnover increased by 2.6% to 496.6 million euros.
In view of the results for the first half of 2023, the Group forecasts for the 2023 financial year an increase in turnover of between +7% and +8% (unchanged), with double-digit growth in the second half for the activity API Solutions and for the CDMO activity.
It is counting on a “Core EBITDA” margin of between 12.5% and 13.5% (against 12% to 14% initially communicated) and is counting on industrial investments of between 120 and 130 million euros (unchanged).
In addition, its medium-term outlook is confirmed. Euroapi wants to increase its turnover by 7 to 8% on average between 2023 and 2026, driven by a double-digit increase in turnover achieved with Other Clients (API Solutions and CDMO).
It is targeting a Core EBITDA margin above 20% in 2026, and above 18% in 2025, and expects 510 million euros in industrial investments over the period 2022-2025, as well as a Core Free conversion rate. Cash-Flow between 50 and 53% by 2025.
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Key points
– One of the world leaders in active pharmaceutical ingredients (No. 1 in small molecules, 2nd in APIs combining small and large molecules and 7th in innovative molecules), created in December 2021 by separation from Sanofi;
– Revenues of €977m, split between API Solutions for 73% and CDMO.
– Business model based on a clear commercial strategy of expansion into new markets and aiming to become a benchmark partner for pharmaceuticals and biotechs;
– Capital held 30.1% by Sanofi, 12% by bpiFrance and 5.5% by L’Oréal, Viviane Monges chairing the 12-member board of directors, Karl Rotthier being managing director;
– Very healthy balance sheet with €1 billion in equity and €19.8 million in net debt.
Challenges
– Strategy 2026:
– revenue growth of +7% to +8%, including double-digit growth in revenue from activities other than Sanofi,
– operating margin of +20% in 2026 and above 18% in 2025
-€510m of investments over 2022-25
– Innovation strategy focused on:
– industrial and logistics optimization,
– innovative molecules developed in the CDMO (Contract Development and Manufacturing) with 30 ongoing projects,
– the combined supply of oligonucleotides and peptides from 2025;
– Environmental strategy aiming for carbon neutrality in 2050:
– 2 stages: 100% of sites powered by renewable energies by 2025, 30% reduction in CO2 emissions by 2035 (vs 2020),
– footprint reduction technologies and biomass investments;
-Ramp up of the production of vitamin B12, prostaglandin, peptides, hormones and oligonucleotides with an investment ratio increased to +14% of turnover;
– Extensive portfolio of 200 references, 55% of which are differential and complex, produced at 6 industrial sites in Europe, an asset in the face of Asian competition penalized by costs and supply chain disruptions.
Challenges
– Evolution of the capital, Sanofi and Bpifrance having to keep their shares until May 2024 and L’Oréal until the end of 2023;
– Increase in operating margin, less than half that of its European competitors –Lonza, Siegried, Bache and PolyPeptide- via an industrial transformation aimed at creating additional value of €50 million;
– Continued reduction of dependence on Sanofi by obtaining new contracts.
-After a loss in 2022, due to impairments on Brindisi assets, downward revision of the 2023 objective: revenue of €980 million and operating margin between 12 and 13%;
– No dividend for 2022,23 and 24.
Find out more about the Pharmacy sector
Biotechs put to the test
These companies are suffering from a much less favorable economic cycle, which is reflected in particular by a drop in financing by venture capital for start-ups. These companies are therefore obliged to carry out redundancy plans. Added to this is a much more restrictive regulatory framework. First, in the United States, the measures linked to the Inflation Reduction Act (IRA) could have a strong impact on the margins of the participants. Indeed, from 2026, the federal Medicare program will be able to renegotiate the price of drugs marketed for nine years (chemicals) or 13 years (biologicals), with discounts that could range from 35 to 60% for biotechs. Similarly, in Europe, with the new drug regulations presented in Brussels in April, the duration of patent protection will be reduced if the innovative treatment is not marketed in all member countries within two years.