(AOF) – The Orpea share posted the strongest rise in the SBF 120 index at the end of the session on November 1 (+11.98% to 9.9 euros), recording a lower performance than the day before. (+ 24.05%). Volatility is very high for Orpea, which has placed itself under legal protection due to a renegotiation of its debt, including the covenants of numerous financing lines which may not be respected as they stand at December 31, 2022.
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Key points
– European number 1 in comprehensive dependency care with more than 120,000 beds and nearly 2,000 establishments in 23 countries, created in 1989;
– Turnover of €4.3 billion, split between France-Benelux for 60%, Central Europe for 26%, Eastern Europe for 9%, the Iberian Peninsula and Latin America ( Brazil, Chile and Uruguay) for 5% then China;
– Value creation model based on an organization adapted to international development in locations with high purchasing power, 50% ownership of real estate (46% in 2021, for a value of 8.2 billion €);
– Split capital (14.5% for the Canadian pension fund CPPIB and 5% for FFP of the Peugeot family), and governance renewed in July with Guillaume Pépy as new chairman of the board of 14 directors, Laurent Guillot being retained as managing director;
– Tense balance sheet with €8.3 billion in debt against €1.1 billion in cash at the end of June, the group having signed a loan agreement accompanied by a program of disposals of real estate assets of €3 billion by the end of 2025.
Challenges
– Development of the 4-point transformation plan: quality of support and resident well-being, strengthening dialogue with stakeholders, ambitious human resources policy and renewed managerial practices;
– Strategy of innovation and anticipation of the management of human frailty:
– Open innovation with 108 projects around health & care, catering & hospitality, construction and processes,
– university research with nearly 30 innovative projects;
– 2023 environmental roadmap:
– 100% of tenders including a CSR assessment,
– 100% of suppliers signatories of the responsible purchasing charter,
– 100% of new constructions certified HQE,
– launch of a green loan;
– Growth reservoir provided by the 26,000 beds under construction (3,000 beds open in 2022);
– Continuation of the rise in the occupancy rate and spin-offs from recruitment and training efforts.
Challenges
– Strong impact of inflation on food and energy consumption, electricity purchases in France not being covered;
– Ongoing strategic review, the accounting consequences of which are not included in the half-year accounts;
– As part of the asset disposal program, questions about the quality of assets, after the impairments in Brazil and Belgium;
– Lack of financial visibility: after a 10.9% increase in revenues and a net loss in the 1st half, expectations for 2022 of a risk of deterioration in the operating margin which would lead to a renegotiation of financial covenants.
An inevitable race for new blockbusters
The patent for Merck’s star product, the cancer drug Keytruda, which accounts for more than 35% of its sales, expires in 2028. Despite the loss, since 2019, of the patents for its three star products (Avastin, Herceptine, Rituxan) Roche was able to renew its portfolio by bringing new molecules to market. However, the discovery and launch of new drugs are increasingly expensive. AstraZeneca spends about $6 billion a year on R&D in a pharmaceutical industry where the life of a patent only lasts ten to fifteen years. This leads laboratories to withdraw from certain activities. Thus J&J, Pfizer, GSK and, no doubt, Novartis soon prefer to refocus on specialty drugs and abandon any ancillary activity.