Underdog with “Firepower”
East German company wants to “roll up parquet from behind”
2/6/2022, 6:26 p.m
Although its IPO was postponed, the Greifswald-based pharmaceutical company Cheplapharm is still setting an example with its plans. Started from scratch 18 years ago and “now we are traded as an MDax candidate,” says company boss Braun. His goal: the largest IPO in the East.
According to Sebastian Braun, the largest IPO of an East German company should have its origins in a small commercial area in the extreme north-east of Germany. “Of course that would be a great thing for the region and Cheplapharm,” says the managing director of the Greifswald pharmaceutical company. Actually, it should have been in the first quarter, but the company has recently postponed the IPO due to volatile markets.
Braun is self-confident – with or without a stock exchange listing. “We are highly profitable and will continue to grow independently of the planned IPO.” 18 years ago we started from scratch. “Now we are traded as an MDax candidate.” The medium-sized family business has grown by an average of 45 percent over the past ten years. Expected annual turnover 2021: beyond the billion mark. The company wants to raise 750 million on the stock exchange.
This would make the Greifswalder one of the exotic East German companies on the stock exchange, says Joachim Ragnitz from the Ifo Institute in Dresden. “Most East German companies are small. They have no place on the stock exchange.” According to Deutsche Börse AG, a good dozen companies with East German headquarters are listed on the Frankfurt Stock Exchange, apart from Berlin companies.
According to Mario Rothaupt from the Rostock Chamber of Industry and Commerce, larger East German companies were often taken over by other companies after reunification. The few listed companies in Mecklenburg-Western Pomerania included the yacht builder Hanseyachts, the wind energy company Nordex and the biotechnology company Centogene.
Let’s see where Greifswald is?
Braun says: “I like that, a little bit with the underdog status, rolling up the field on the Frankfurt Stock Exchange from behind and that one or the other might put their finger on the map and look at where Greifswald is.” The largest IPO from East Germany – that would be interesting, “because it simply shows how much firepower is now in East Germany”.
All over the world, the Greifswald-based company mainly markets special drugs that have been established for a long time and have already fallen out of patent protection. “The big pharmaceutical companies have noticed that it makes sense to part with such products in order to reduce complexity and really concentrate on their core business,” explains Braun. For “Big Pharma” these are new developments with strong growth.
Cheplapharm takes care of the “slightly older treasures”. It is about preparations for cancer therapy. Some of the drugs have no competitors. For generics manufacturers, on the other hand, the costs for the replica are not worth it because the market is too small. This is where Cheplapharm’s niche is located. The company takes over the brands and the approvals and ensures that the drugs remain available. Both logistics and production are largely delegated to other companies. The company thus dispenses with expensive production facilities.
“enrichment for the course sheet”
The profit margin – based on earnings before interest, taxes, depreciation and amortization (Ebitda) as a percentage of sales – has been above 50 percent for the past few years and 61 percent in the first nine months of 2021, according to the company. Olaf Tölke from Scope Ratings speaks of a good concept and high margins: “Certainly a good enrichment for the price list.” In addition, pharmaceutical companies are currently in demand anyway. It could well be that optimists on the stock exchange value the company at up to ten billion, as the media recently reported. From the point of view of a rating agency, he considers such magnitudes to be somewhat exaggerated, also because of the company’s indebtedness. According to Braun, the IPO should also contribute to reducing the 2.45 billion euros in debt, also with a view to market expectations. However, he does not consider the debt to be a problem. This is a level of leverage that is customary in the industry.
According to its own statements, the company has purchased more than 125 products since 2014 for around 3.3 billion euros and sells them in around 145 countries. Braun started with cosmetic products. His absolute highlight after two to three years was taking over a pharmacy-only medicine for heartburn, he remembers. Today he runs the company in duo with Edeltraud Lafer.
Braun’s parents have been investing in companies in Western Pomerania since the 1990s, including a butcher’s shop, but also the pharmaceutical company Riemser in Greifswald. Here, as well as abroad, Braun gained experience in the pharmaceutical industry. In addition, the trained banker was able to use his parents’ network when he started his own business at the age of 23. In 2003, Braun and his sister Bianca Juha bought the Freiburg company Cheplapharm – a two-person company with annual sales of 600,000 euros and just as large liabilities, as Braun says – and relocated it to the Baltic Sea. According to Braun, the two owners are not planning to sell shares on a large scale in the foreseeable future.
According to Braun’s ideas, with further investments the number of employees – currently more than 460 – should also grow, especially at the Greifswald location. “For me, there is no question that we are investing in other products.” Of the investments of 1.2 billion euros planned by the end of 2022, 920 million euros were already signed last year. Braun also sees enough opportunities for Cheplapharm in the future. In 2024, the big pharmaceutical companies will have products with a total turnover of 140 billion US dollars, which will be the focus of the company. A new office building in the Greifswald industrial park is planned.