Investors put 550 million euros in drug manufacturers

Cheplapharm headquarters in Greifswald

The company does not have its own research and development, but buys established drugs from large pharmaceutical companies.

(Photo: Cheplapharm)

Frankfurt The Greifswald drug manufacturer Cheplapharm has found investors for its planned expansion. The US financial investor Atlantic Park and GIC, a sovereign wealth fund from Singapore, are providing 550 million euros, as the company announced on Tuesday.

The money will flow in the form of a subordinated convertible bond with a term of six and a half years. This will be obligatorily exchanged for ordinary shares at maturity or at an IPO. The exact amount of the stake should only be determined at the time of conversion, but should be less than 20 percent.

“Despite the current adverse market conditions, Cheplapharm’s implied enterprise value is in the high single-digit billions,” CFO Kia Parssanedjad told Handelsblatt. The enterprise value including debt of seven to nine billion euros is at the level that the company wanted to achieve with the IPO planned at the beginning of the year. At the end of June, net debt was 3 billion euros.

Last year the company posted an operating profit (Ebitda) of 624 million euros on revenues of 1.1 billion euros. According to the company, sales increased by 20 percent in the first half of the current year.

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One of the reasons for the high margin: The company does not have its own research and development, but buys established drugs from large pharmaceutical companies. The company has these manufactured under contract and then sells them.

Cheplapharm had to cancel the IPO in the spring

In 25 years, Cheplapharm has thus acquired a portfolio of more than 100 mostly prescription drugs whose patent protection has expired and which have been on the market for at least 20 years. There are no risks of failure of own drug development.

profit machine

56.7

percent margin

booked Cheplapharm last year. The so-called Ebitda margin is calculated by dividing the operating profit before interest, taxes, depreciation and amortization by sales.

However, 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, the company has acquired approved drugs for more than 3.3 billion euros, for example from Roche, Takeda and Leo Pharma.

“Together with Atlantic Park and GIC, we can take advantage of the investment opportunities that lie ahead of us and actively promote the sustainable development of our company,” said Cheplapharm boss and founder Sebastian Braun.

Atlantic Park is a joint venture between the financial investor General Atlantic – known in Germany for its involvement in Pro-Sieben Internet activities such as the Parship partner exchange – and the credit investor Iron Park. GIC has also made several investments in Germany and is involved in the smartphone bank N26, for example.

Cheplapharm plans to use the fresh funds to advance its acquisition-focused strategy. Cheplapharm originally wanted to go public in February and had hoped for a valuation of more than eight billion euros including debt by selling shares for 750 million euros.

In view of the adverse situation on the capital markets, the company had to cancel the deal and then went in search of investors. This should actually be completed in June.

More: Credit market for mergers and acquisitions collapses

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