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PharmaSGP,
During the pandemic, a tiny German pharmaceutical firm that provides nonprescription medications and health-care goods faltered. Pharmacies and shops sell its chemical-free goods for pain relief and other conditions like vertigo, skin aging, and sexual dysfunction, accounting for over 70% of its revenue. Because staff at its wholesale partner were sick with coronavirus, it took longer to list new products so merchants could place orders. Some deliveries to an important market were also delayed.
When compared to the same period last year, revenue for this Munich-based company (ticker: PSG.Germany) fell by 26% in the first quarter. The stock has lost nearly 16 percent this year, trading at 21.10 euros ($24.91). However, the company has a robust pipeline of new products in the works, and the natural therapies sector is still thriving. PharmaSGP is also not yet on the radar of major investors. All of this points to the stock being a good buy. In a research note, Charlotte Friedrichs, an analyst at Berenberg, argues that consumer patterns “suggest significant growth and premium prices for chemical-free products.” She thinks the stock will go up to €35. “The company has outgrown the market due to its effectiveness in developing strong brands and its direct-to-consumer marketing approach,” she says. International expansion is another driver of growth. PharmaSGP’s products are already available in Austria, Italy, Belgium, Spain, and France, and the company is waiting for pandemic limitations in other regions to be lifted before expanding further. In the first quarter, its overseas sector performed better, with sales down 18 percent compared to a 33 percent drop in its important German market. All of the company’s overseas markets are administered from its headquarters in Germany. The company works with 50 suppliers and outsources manufacturing to partners. PharmaSGP also makes money by selling its products through third-party partners on the internet. In addition, the business is expanding the ranges of its existing brands to include tablets, liquid drops, beverages, and creams, as well as adding new medicines to address sleep disorders and anxiety. The company has a market value of €267 million and employs only 67 people. It is valued at a 20% discount to its peers and gets a multiple of 19.2 times this year’s estimated earnings. PharmaSGP reported €16.5 million in adjusted earnings before interest and taxes in 2020, down from €22.4 million in 2019. The company made a profit of €63.2 million. In a statement to Barron’s, CEO Natalie Weigand said the company is “absolutely persuaded” of its asset-light, direct-to-consumer business strategy with a pan-European reach. She also stated that PharmaSGP is in the process of being acquired. In June, the company purchased four brands from
GlaxoSmithKline
(GSK) for a total of €80 million. These were over-the-counter pain relievers and insomnia medications, notably Baldriparan, a sleep aid offered in German pharmacies. “Our recent acquisition from GSK reflects the significant business potential for PharmaSGP,” Weigand tells Barrons. The alternative medicine business is expected to be worth $404.6 billion by 2028, according to Grand View Research. PharmaSGP will profit from this niche due to an elderly population gravitating toward chemical-free pharmaceuticals provided by the company. This could offer investors a positive impression of the stock./n
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