The pharmaceutical company is looking for a financier for its growth plans.
(Photo: Cheplapharm)
Frankfurt The Greifswald drug manufacturer Cheplapharm is looking for investors to finance its planned expansion. According to financial circles, private equity firms and family offices are currently bidding for a share of ten to 15 percent.
Should a deal come about, the money would flow to the company through a capital increase and could be used for further acquisitions. But no decisions have been made yet, people familiar with the matter said.
Cheplapharm does not have its own research and development, but buys established drugs from large pharmaceutical companies, which the company then has contracted out and sells. “We are well financed and have no pressure to carry out a financing measure,” said a company spokesman.
Cheplapharm has a high free cash flow and took on additional debt capital in February. “But we basically keep all financing options open,” said the spokesman.
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In the deal, Cheplapharm could be valued at up to seven billion euros, including debt. That’s a little less than the company had hoped for in the IPO planned for this February, which the company had to cancel due to the adverse situation on the capital markets. Some investors assume that the valuation could ultimately be around six billion euros.
According to the information, many well-known financial investors and a number of family offices have made it onto the shortlist. A decision could be made by the end of June if Cheplapharm decides to take the step.
In 25 years, the company has bought a portfolio of more than 100 mostly prescription drugs for a good three billion euros, whose patent protection has expired and which have been on the market for at least 20 years. So far, the money for this has come from ongoing business and high-yield bonds.
Cheplapharm constantly has to buy new preparations
The IPO was supposed to bring in 750 million euros, with which Cheplapharm wanted to finance the purchase of further pharmaceutical products and repay part of its current debt of around three billion euros.
For Cheplapharm, the focus on medicines without patent protection offers the advantage of calculable sales and profits. There are no risks of failure of own drug development. Since Cheplapharm calculates an annual decline in sales of three to four percent for its products, the company is dependent on constantly buying new preparations.
In total, Cheplapharm has bought approved drugs for more than 3.3 billion euros. In 2021, the company spent 920 million on new drugs from groups such as Roche, Takeda and Leo Pharma, and the acquisition of other products for more than 1.8 billion euros is being examined.
Last year, Cheplapharm posted an operating result (Ebitda) of 624 million euros with revenues of 1.1 billion euros. In February, the company secured a new €1.5 billion line of credit with an initial interest rate of four percent above Euribor, as well as a new €545 million revolving credit facility. The level of debt is four times Ebitda, a comparatively high value. Raising equity should help to make the financing less risky.
Other companies with IPO plans are also currently looking for investors, as the high volatility on the stock markets has made IPOs almost impossible. From the healthcare sector, for example, KD Pharma, a manufacturer of products with omega-3 fatty acids, is in talks with financial investors.
More: KD Pharma says goodbye to the IPO and is looking for additional investors