FAGR Fagron NV

Fagron NV: Turnover increase of 10.6%; REBITDA increased to €55.6 million

Regulated informationNazareth (Belgium)/Rotterdam (Netherlands), 5 August 2019

Turnover increase of 10.6%; REBITDA increased to €55.6 million

Acquisitions strengthen market position in Latin America and Europe

New sustainable credit facility of €375 million

S1-2019 Highlights1 – Financial

• Turnover increased to €255.4 million (+10.6%)
• REBITDA2 increased to €55.6 million (+6.4%)
• EBITDA increased to €54.2 million (+13.8%)
• Net profit3 increased to €26.8 million (+44.4%)
• Strong operational cash flow of €37.5 million
• Net financial debt/REBITDA ratio of 2.55 on 30 June 2019

Strategic – Operational

• Successful continuation of buy-and-build strategy with acquisitions in Brazil, Czech Republic and Mexico
• Start construction of new GMP repackaging facility in Poland
• Sterile GMP compounding facility in the Netherlands fully operational since July
• Promising start for Fagron Genomics with 2,200 DNA tests sold in Q2-19
• New sustainable credit facility of €375 million with improved terms
• Settlement in principle with US Department of Justice

Rafael Padilla, CEO of Fagron: “We are very pleased with the results and progress made in the first semester of 2019. Not only did Fagron once again show good growth in turnover, but also the construction of the new facility in Poland and the investments in North America strengthen our foundation for further growth. We are therefore convinced that we are well-positioned to benefit from the substantial growth opportunities in the markets for personalised medicine.

The strong turnover growth was especially driven by the excellent performance in North America and the solid turnover development in Latin America. In addition to strong organic growth, we further strengthened our leading market positions in Brazil and the Czech Republic with four acquisitions and made a robust entrance in the Mexican market. Once again, these are important steps in the execution of our disciplined buy-and-build strategy in our core markets.

We are confident that we will realise a nice increase of turnover and profitability in the second semester of 2019 in comparison to the same period in 2018.

Update buy-and-buildIn the second quarter of 2019, Fagron further strengthened its market leadership in Brazil with the acquisitions of Levviale, Apace and Ortofarma Laboratories. Fagron completed the acquisition of Dr. Kulich Pharma in the Czech Republic in July 2019.

The three Brazilian acquisitions (Levviale, Apace and Ortofarma) realised a combined turnover of approximately €9.9 million and an EBITDA margin of approximately 7.4% in 2018. Dr. Kulich Pharma realised turnover of approximately €5.1 million and an EBITDA margin of approximately 17.8% in 2018. The total consideration for Levviale, Apace, Ortofarma and Dr. Kulich Pharma amounted to approximately €10.6 million. The acquisitions are financed from the existing credit facilities of Fagron.

Dr. Kulich Pharma - Czech RepublicDr. Kulich Pharma is a supplier of pharmaceutical raw materials, creams and ointments and packaging materials to compounding pharmacies in the Czech Republic. Dr. Kulich Pharma is the number two in the Czech Republic after market leader Fagron. Established in 1992, Dr. Kulich employs 66 employees (in FTE), is situated in Prague and has warehouses and repackaging facilities in Hradec Králové as well as in Otrokovice. The acquisition of Dr. Kulich Pharma provides significant operational synergies for Fagron.

Ortofarma Laboratories - BrazilOrtofarma is an innovative company that provides a wide range of services to more than 1,000 compounding pharmacies in Brazil. The offer ranges from analytical testing and advice to the development of innovative products and training. The strong strategic fit between Ortofarma and Fagron, combined with the capacity expansion in product development, ensures that Fagron’s position is further reinforced in the growing demand for Brands that are used in compounding. Ortofarma was established in 1999 and employs 39 employees (in FTE). Ortofarma is situated in Juiz de Fora, a city in the southeast of Brazil.

Levviale - BrazilLevviale is a supplier of active pharmaceutical ingredients, excipients and Brands to compounding pharmacies in Brazil. The innovative Levviale Brands, such as Baseffer®, Celulomax® and Oro-tab®, are all based on excipients to increase the biological availability of medicines. The Levviale Brands will also be introduced in Europe and North America at the beginning of 2020. Levviale was established in 1992 and employs 75 employees (in FTE). Levviale is situated in São Paulo and has a repackaging facility for raw materials in Anápolis.

Apace - BrazilApace is a developer and supplier of packaging materials to compounding pharmacies and the pharmaceutical industry in Brazil. Apace’s product offering fully complements Fagron’s comprehensive range. Apace, situated in São Paulo, was established in 1983 and employs 41 employees (in FTE).

Cedrosa - MexicoFagron completed the acquisition of Central de Drogas, S.A de C.V. (“Cedrosa”) in July 2019. Cedrosa is a leading supplier of pharmaceutical raw materials to compounding pharmacies and the pharmaceutical industry in Mexico. The press release about the acquisition of Cedrosa can be downloaded here.

Operational updateStart construction of new repackaging facility in PolandIn the first semester of 2019, Fagron started with the construction of a new GMP facility for the repackaging of raw materials in Krakow, Poland. The 5,000 m2 facility will comply with all quality requirements and will have 1,000 m2 of clean rooms for the repackaging of raw materials under GMP and 800 m2 of laboratory for analysing raw materials. The new facility will not only replace the current Polish facility but is also an important step in the process to more centralise the repackaging of raw materials in Europe. The location in Poland is very suitable for this purpose given its central location in Europe and the high-quality standards that are applicable here. The total investment is currently estimated at €8 million. The new facility is expected to be operational in the second semester of 2020 and a structural annual margin improvement of €2 million is expected, starting in 2021.

Sterile compounding facility in the Netherlands fully operationalFagron’s sterile compounding facility in The Netherlands started up again in the second quarter of 2019 and is fully operational again since July. The facility was audited by the Dutch Health Care and Youth Inspectorate (IGJ). IGJ stated in its report that the facility complies with all requirements and issued a GMP-certificate.

Financing updateNew sustainable credit facility with improved termsOn 1 August 2019, Fagron entered into a new syndicated multi-currency credit facility of €375 million with improved terms, resulting in greater flexibility and lower financing costs. The new credit facility has a maturity of five years with two one-year extension options. The new credit facility ultimately expires in 2026 and replaces the current facility of €325 million. ING acted as Coordinator for the facility.

The credit facility is a so-called Sustainability Linked Loan. The interest on the new credit facility is linked to Fagron’s sustainability aim to reduce greenhouse emissions (Scope 1 and Scope 2 of the GHG protocol) in six years by approximately 30%. Based on the annual progress measured, a discount or surcharge can be applied to the credit facility’s interest rate.

The syndicate for the new credit facility consists of ING Belgium NV/SA (also Facility Agent), BNP Paribas Fortis SA/NV and KBC Bank NV as “Bookrunning Mandated Lead Arrangers” and Belfius Bank SA/NV, Commerzbank Aktiengesellschaft (Luxembourg branch) and HSBC France (Brussels branch) as “Mandated Lead Arrangers”.

Settlement in principle with the US Department of JusticeAs announced earlier, Fagron entered into a settlement in principle with the US Department of Justice on 26 June 2019 regarding the previously announced civil investigation in the context of the sector-wide investigation into the pricing of pharmaceutical products. The settlement consists of a payment by Fagron of US$ 22.3 million. In the results of the first semester of 2019, Fagron took, in addition to the current provision of US$ 8.4 million, an additional provision of US$ 13.9 million. The final, legally binding, settlement between the US Department of Justice and Fagron is expected to be formalised in the second semester of 2019. The press release about the settlement in principle can be downloaded here.

Please open the link below for the press release:

Turnover increase of 10.6%; REBITDA increased to €55.6 million

Please open the link below for the interim financial statements:

Interim financial statements first semester 2019