Fagron Sa · EURONEXT:FAGR
Fagron Sa — Investor Day (March 2022)
69 slides from Fagron Sa's investor day presentation, Mar 15, 2022
Slide 1: Compounding for Growth
COMPOUNDING FOR GROWTH Capital Markets Day 15 March 2022
Slide 2: Disclaimer
Introduction Disclaimer The contents of this document, including all statements made therein, are based on estimates, assumptions and other information currently available to the management of Fagron. Certain statements in this presentation may be deemed to be forward-looking. Such forward-looking s
Slide 3: Agenda
Agenda Part 1 14:00 – 14:15 Fagron Today 06 14:15 – 14:30 Market Opportunity 14 14:30 – 14:45 Strategic Framework 21 14:45 – 15:00 Q&A 15:00 – 15:10 Break Part 2 15:10 – 15:40 Deep dive: EMEA (incl. Q&A) 32 15:40 – 16:05 Deep dive: Latin America (incl. Q&A) 42 16:05 – 16:35 Deep dive: North America
Slide 4: Today's speakers
Introduction Today’s speakers Rafael Padilla Karin de Jong Hans Waals CEO CFO Managing Director, Tiofarma Constantijn van Rietschoten Andrew Pulido Area Leader EMEA Area Leader North America 4
Slide 5: Our objective today is to provide you with a clear understanding of…
Introduction Our objective today is to provide you with a clear understanding of… Our market Our competitive Our strategic Our approach per Our mid-term dynamics strengths & relative priorities region & segment financial plan positioning 5
Slide 6: Fagron Today
Fagron Today
Slide 7: Global leader in pharmaceutical compounding
Fagron Today Global leader in pharmaceutical compounding FArmaceutische GRONdstoffen was founded in 1990 Serving…… Present in 19 countries Favorable Active in 35 countries Hospitals Pharmacies Industries Prescribers / market dynamics patients and strong >3,000 people market positioning …..worldwide
Slide 8: Uniquely integrated across the entire compounding value chain
Fagron Today Uniquely integrated across the entire compounding value chain Compounding overview 1. Brands & Essentials 2. Industry 4. c. 1% of the global pharma industry Wholesaler 3. Pharmacy Patient Hospital & Clinic Compounding Services 8
Slide 9: Robust top-line growth and profitability with high cash conversion
Fagron Today Robust top-line growth and profitability with high cash conversion Group Revenue Organic Revenue Growth (at CER) REBITDA and REBITDA Margin 130.00 117.0 123.9 118.3 25.0% 7.7% 30% 24.0% 700.0 110.00 95.7 99.1 CAGR 23.0% 600.0 20% 90.00 22.0% 500.0 159.5 177.6 22.1% 22.3% 145.9 21.9% 21.
Slide 10: Successful M&A track record and strong execution capabilities
Fagron Today Successful M&A track record and strong execution capabilities Acquisition of Kemig B&E Acquisition of Ortofarma Lab, B&E Levviale and Apace B&E Acquisition All Chemistry B&E Acquisition of Cedrosa Acquisition of US 2018 2020 CS Compounding’s book of 2022 B&E Acquisition of Dr Kulich bus
Slide 11: Unrivalled global presence with increasing diversification
Fagron Today Unrivalled global presence with increasing diversification EMEA Latin America North America 53.8% 34.2% 19.9% 24.2% 18.2% 4.9% 2017 57.6% 8.4% 2017 2017 1.8% 37.9% 64% 75.2% 21.8% 21.7% 1.8% 18.1% FY 2021 REBITDA Margin FY 2021 REBITDA Margin FY 2021 REBITDA Margin 56.0% +0.9% +8.1% 24.
Slide 12: Serving a wide network of pharmacies and leveraging long-standing institutional relationships
Fagron Today Serving a wide network of pharmacies and leveraging long-standing institutional relationships Servicing pharmacies Ability to operate 10% directly or via wholesalers interchangeably as Pharmacies - Extramural (EMEA & Latin America), or supplier of B&E or GPOs and IDNs (North on an outso
Slide 13: Resilient business model and established growth platform
Fagron Today Resilient business model and established growth platform 8. Robust financial profile 1. Vertically integrated 7. Favourable secular trends 2. Diversified business mix Sustainable Growth 6. Highest quality and 3. Strong client centricity safety standards 5. Innovation focus 4. Broad prod
Slide 14: Market Opportunity
3! Fagron personalizing medicine
Slide 15: Global compounding market expected to grow in line with historic rates
Market Opportunity Global compounding market expected to grow in line with historic rates over the mid-term €3.5bn €5.0bn EMEA 2020 market North America 2020 market Global market to €1.8bn grow at ~6.0% Latin America CAGR over 2020 market 2021 – 2026 Source: Company Estimates 15
Slide 16: Strong positioning in key market segments
Market Opportunity Strong positioning in key market segments Region Segment Fagron Positioning Competitive Intensity B&E Moderate & stable • #1 positions in mature home markets EMEA • Strong challenger positions in most other markets Compounding Services High & stable B&E High & stable • Clear marke
Slide 17: Long-term secular drivers underpin market resilience
Market Opportunity Long-term secular drivers underpin market resilience Market Fragmentation Regulation Accessibility Personalization Demographics 17
Slide 18: Growing need for personalized, convenient and accessible care
Market Opportunity Growing need for personalized, convenient and accessible care Demographics Growing medical Increasing treatment Expanding middle class Healthy lifestyle needs for ageing required for chronic with increasing awareness with increased populations diseases disposable income focus on p
Slide 19: Increasing regulatory scrutiny driving outsourcing & consolidation trends
Market Opportunity Increasing regulatory scrutiny driving outsourcing & consolidation trends Regulation imposing increasingly strict Outsourcing configuration* quality & safety requirements Unlimited Difficult for pharmacies to comply given high Sterile compounding only capital investment Fagron wel
Slide 20: Largely fragmented and regional competition offers consolidation opportunities
Market Opportunity Largely fragmented and regional competition offers consolidation opportunities Natural market Germany the largest and Most attractive consolidation EMEA fragmentation linked to fastest-growing market opportunities identified in Germany, regulatory landscape Italy and Eastern Europ
Slide 21: Strategic Framework
Strategic Framework
Slide 22: Together we create the future of personalizing medicine
Strategic Framework Together we create the future of personalizing medicine Together we enable pharmacists, prescribers, hospitals and the industry to provide quality, safety and service for their patients. We create value in healthcare by offering the entire range of products and services for compo
Slide 23: Strategic priorities to drive improved growth and value creation
Strategic Framework Strategic priorities to drive improved growth and value creation Compounding Services Essentials Brands Sterile Non-Sterile Accelerate organic growth Optimize non-sterile compounding business & positioning in the Netherlands Continue broadening our product portfolio leveraging ou
Slide 24: Strategic ambitions underpinned by operational enablers
Strategic Framework Strategic ambitions underpinned by operational enablers Strategic Priorities Global leadership Optimize non-sterile in Brands & Enablers compounding and Essentials across registration our markets Global Operational business Excellence Fagron Academy Become leading, Build the glob
Slide 25: Driving global operational excellence
Strategic Framework Driving global operational excellence Globalization Optimized approach underpins sourcing to drive Standardization of Digitalization to knowledge transfer product manufacturing increase customer and drive towards availability and processes engagement and best practices competitiv
Slide 26: Fagron Academy boosts innovation and customer centricity
Strategic Framework Fagron Academy boosts innovation and customer centricity Academy audiences 25,000 1 Free Content participants • Mainly product/brand related every year promotional material globally Pharmacists Prescribers Internal Paid Content 2 • Elementary knowledge video • Virtual classes or
Slide 27: Focused M&A approach in line with segment growth strategies
Strategic Framework Focused M&A approach in line with segment growth strategies Strategic Rationale M&A Focus in 2022 – 2026 Geographical Fagron is the ideal consolidation platform due to our global profile and delivery foundations built over the last four years Expansion Market Consolidation Furthe
Slide 28: Strong M&A execution capabilities: Gako acquisition case study
Strategic Framework Strong M&A execution capabilities: Gako acquisition case study (Feb 2020) Background • Pioneer in the field of mixing equipment for compounding in closed environments • Previous owners currently still managing the company Strategic Rationale • Gako had the specific goal to improv
Slide 29: Sustainable value creation model with clear ESG objectives
Strategic Framework Sustainable value creation model with clear ESG objectives Giving Back Good Low impact on Benefits to Our Responsibility in Governance Environment People Supply Chain Fagron Foundation >90% of employees 30% reduction in 50/50 male-female Discuss ESG in donates healthcare complete
Slide 30: Advancing governance profile towards global best practice
Strategic Framework Advancing governance profile towards global best practice 2021 Board Profile 2022 Board Profile* 8 Members 9 Members 50% Independent Directors 67% Independent Directors 5 to 3 Male-Female ratio 5 to 4 Male-Female ratio 75% Non-Executive Directors 78% Non-Executive Directors * to
Slide 31: Q&A
Q&A #!Fagron
Slide 32: EMEA
EMEA Leverage strong market positioning and competitive strengths
Slide 33: A balanced and wide portfolio of leading businesses
EMEA A balanced and wide portfolio of leading businesses B&E the powerhouse of our EMEA business Regional Snapshot (December 2021) Compounding Laboratories Pharmacists Countries Compounding Services, 28.6% employed facilities EMEA €255.1m Brands, 15.3% 1 162 14 11 44.5% Employees Energy Warehouses E
Slide 34: Structured approach to addressing recent challenges in EMEA
EMEA Structured approach to addressing recent challenges in EMEA Key Challenges Deferred Registration Increased Supply Temporary elective of compounds localized chain cost care by 3rd parties competition pressures duplication (NL) (NL) Remedial Actions Reinforced Strengthened Globalized Relentless A
Slide 35: Diversification potential from a number of large and growing markets
EMEA Diversification potential from a number of large and growing markets where we already operate Growth Prospects MEA Germany Italy Rest of Europe Czech Poland Republic France UK Belgium Netherlands Market Size Source: Company estimates 35
Slide 36: How to win – Long-term drivers of success in EMEA
EMEA How to win – Long-term drivers of success in EMEA Product Portfolio Regulatory Compliance Operational Excellence Product Portfolio Product Portfolio Innovation Regulatory Compliance Operational Excellence Capacity Expansion 36
Slide 37: Leadership underpinned by broad product portfolio and focus on quality
EMEA Leadership underpinned by broad product portfolio and focus on quality B&E: Unrivalled product offering Broad assortment of raw materials, branded vehicles and equipment, packaging materials and supplies for compounding facilities Many products not covered by local competitors Product leadershi
Slide 38: Innovation driven at local level and supported by global capabilities
EMEA Innovation driven at local level and supported by global capabilities Global Proof-based Digitalization Client Centricity infrastructure, approach drive local insights 38
Slide 39: Margin resilience from long-term focus on operational excellence
EMEA Margin resilience from long-term focus on operational excellence B&E: Operational excellence bolstered Compounding Services: by transition to new centralized GMP Manufacturing excellence and repackaging facility in Poland unparalleled track record of quality GMP audit finalized and facility ful
Slide 40: Future focus across our EMEA platform
EMEA Future focus across our EMEA platform Achieve leadership positions in Essentials in all markets where we operate Accelerate revenue contribution from Brands Grow Fagron Sterile Services (FSS) & optimize market share in non-sterile 40
Slide 41: Netherlands: Long-standing partnership with Tiofarma
EMEA Netherlands: Long-standing partnership with Tiofarma Rock-solid, long-standing Continued product portfolio All Dutch pharmacies Well-filled funnel with high- and reciprocal expansion through joined purchasing Fagron & Tiofarma’s potential registration relationship development and innovation non
Slide 42: Latin America
Latin America Leverage unrivalled leadership to continue growth trajectory
Slide 43: Brazilian B&E business at the core of our Latin American growth platform
Latin America Brazilian B&E business at the core of our Latin American growth platform Operating in a largely in-sourced market Regional Snapshot (December 2021) Laboratories Pharmacists Fagron Mexico Brands, 26.6% 1 employed Latin America Compounding 77 24.6% € 141.1m Services, 1.8% GMP repackaging
Slide 44: Strong top-line growth supported by healthy and steady margins
Latin America Strong top-line growth supported by healthy and steady margins Accelerating growth trajectory Robust margin development 200 40.00 30.00% 180 25.0% 21.7% 20.1% 35.00 20.2% 19.9% 20.2% 20.0% 16.5% 20.00% 160 12.7% 15.0% 30.00 140 10.4% 141.1 25.00 30.5 10.00% 120 4.6% 129.1 5.0% 100 125.
Slide 45: How to win – Long-term drivers of success in Latin America
Latin America How to win – Long-term drivers of success in Latin America Product Portfolio Regulatory Compliance Operational Excellence Product Portfolio Product Portfolio Innovation Regulatory Compliance Operational Excellence Capacity Expansion 45
Slide 46: Multi-brand & product strategy supported by innovation & education capabilities
Latin America Multi-brand & product strategy supported by innovation & education capabilities Multi-brand strategy & • Integrated multi-brand strategy unrivalled product portfolio • Wide product portfolio with no equivalent in the region, delivering everything a compounding pharmacy needs: • Active
Slide 47: Compliance with ANVISA's world class standards a key barrier to entry
Latin America Compliance with ANVISA’s world class standards a key barrier to entry Anvisa’s world class standards Complete revamp of repackaging facility in Anápolis to uphold compliance & competitiveness • Anápolis GMP repackaging facility: our flagship plant in Brazil • Anvisa: Brazilian Health R
Slide 48: Operational excellence benefiting from recent optimization projects
Latin America Operational excellence benefiting from recent optimization projects Modernised GMP- Integrated supply- repackaging facility chain & distribution Digitalized Centralized organisation resources 48
Slide 49: Continued focus on growth and operational efficiency
Latin America Continued focus on growth and operational efficiency Maintain strong position in existing markets Sustain focus on operational excellence Increase product availability and competitiveness 49
Slide 50: North America
North America Grow & gain scale in the world’s largest compounding market
Slide 51: Balanced business portfolio and strong growth trajectory
North America Balanced business portfolio and strong growth trajectory Balanced business portfolio Regional Snapshot (December 2021) Compounding Laboratories Pharmacist Head Compounding Services, 61.0% employed quarters in facilities North America 31.0% € 177.6m Brands, 14.7% 1 195 Austin (TX) 4 Emp
Slide 52: Transformation initiatives driving improved market positioning
North America Transformation initiatives driving improved market positioning Optimizing US business step by step Integrated Invested in Strengthened Optimized commercial Wichita to Increasing Diversified focus on Executed leadership brand and strategy and become high customer prevention & discipline
Slide 53: How to win – Long-term drivers of success in North America
North America How to win – Long-term drivers of success in North America Product Portfolio Regulatory Compliance Operational Excellence Product Portfolio Product Portfolio Innovation Regulatory Compliance Operational Excellence Capacity Expansion 53
Slide 54: Broadened & innovative product portfolio
North America Broadened & innovative product portfolio Ready for market leadership in B&E Acquisition of Letco optimizes and broadens product portfolio FSS US benefiting from strong innovation • Letco is the market leader in capsules, dosage forms and delivery systems Portfolio breadth: • Offers uni
Slide 55: Regulatory compliance a key barrier to entry in US compounding
North America Regulatory compliance a key barrier to entry in US compounding Strict 503A and 503B standards driving market concentration… • Serious health incidents in 2012 led to tightened regulation • 503A registered compounding pharmacies also subject to increasing …and greater outsourcing by pha
Slide 56: Adding capacity and leveraging scale
North America Adding capacity and leveraging scale B&E – Integrating Letco to our growth platform Two GMP repackaging facilities (Minnesota and Alabama) Compounding Services – Letco acquisition bringing Consolidating and scaling up complimentary operational footprint in Alabama (operations) and Ariz
Slide 57: Further upside from Wichita expansion in the mid-term
North America Further upside from Wichita expansion in the mid-term Wichita expansion to capture market growth opportunity Further expansion of current Wichita facility, focused on IV bags production US$ 20m of CAPEX investment expected Combined revenue run-rate of current and additional capacity to
Slide 58: Continue scaling the business to gain market share
North America Continue scaling the business to gain market share Consolidate leadership in B&E Become leading sterile compounding platform Optimize operations 58
Slide 59: Financial Framework
Financial Framework
Slide 60: Robust track record of growth, profitability and cash generation
Financial Framework Robust track record of growth, profitability and cash generation 2017 – 2021 Key financial highlights* +7.7% reported +7.8% organic revenue at +3.5% REBITDA revenue CAGR constant FX CAGR CAGR 21.6% REBITDA margin 73.9% operating cash +5.4% Adj. EPS CAGR on average conversion on a
Slide 61: Accelerating Fagron's growth journey
Financial Framework Accelerating Fagron’s growth journey 2022 – 2026 key financial targets +8% organic revenue REBITDA margin consistent CAGR at CER with 2017-21 average Cash generation & earnings Capital allocation focused on conversion to remain growth opportunities sustainably high 61
Slide 62: Revenue growth to benefit from LFL in high-single digits
Financial Framework Revenue growth to benefit from LFL in high-single digits EMEA Latin America North America Wichita upside Stronger overall from 2027 positioning in B&E and CS • Market share Mid-teens optimization initiatives in Primarily driven by B&E mature home markets • Continued growth in +8%
Slide 63: Growth upside from M&A opportunities
Financial Framework Growth upside from M&A opportunities STRATEGIC CRITERIA WHAT WE PRIORITIZE BUILDING OUT STERILE PLATFORM, CONSOLIDATE B&E • Market share • Strong commercial links PRIORITIZE EMEA & NORTH AMERICA • Entrepreneurial approach • Product assortment EXPAND & DIVERSIFY • Synergies potent
Slide 64: Drivers of future REBITDA margin profile
Financial Framework Drivers of future REBITDA margin profile REBITDA MARGIN Operational Global Manufacturing leverage from procurement excellence growth initiatives optimization Average REBITDA margin consistent with 2017 – 21 Supply chain and Initial dilutive impact average raw material from ‘buy &
Slide 65: Cash generation & earnings conversion to remain sustainably high
Financial Framework Cash generation & earnings conversion to remain sustainably high Continued benefits from CAPEX to remain REBITDA margin asset light model well under control Consistent 10 – 11% 3% – 3.5%* Avg. REBITDA Operating Working Capital CAPEX margin 2022-2026 as a % of revenue as a % of re
Slide 66: Reinvesting capital for long-term sustainable growth
Financial Framework Reinvesting capital for long-term sustainable growth Organic Investment M&A • Funding LFL growth & margin accretive • Stringent and selective approach to projects a priority acquisitions • Working capital investment to remain • Focus on small-to-mid-size deals under control Inves
Slide 67: Key Takeaways
Key Takeaways
Slide 68: Fagron ready to launch the next phase of its growth journey
Conclusion Fagron ready to launch the next phase of its growth journey 01 Solid track record 02 Improved execution capabilities Compounding for Success 03 Embedded sustainability focus 04 Prudent financial approach 05 High-calibre global team 68
Slide 69: Thank you
THANK YOU