Sopharma

The biggest vertically integrated human health pharmaceutical group in Bulgaria Sopharma booked record performance in 2017 with the top line hitting BGN 1bn and best EBITDA ever on strong organic and M&A driven growth. Individual bottom line margins healthy above historical and peer averages at 20%+ as cost and group optimization kicked in.

The Group has almost completed its optimization program by merging key production subsidiaries.

This is what ELANA Trading analysts say in their updated corporate profile for the Group.

Market expansion mode on via distribution arm

In 2017, distribution arm Sopharma Trading entered the USD 1.1bn Serbian market by acquiring 70% in local peer Lekovit. In the midterm, the latter targets 20%+ market share via a mirror image of Sopharma Trading’s vertical integrated wholesale and retail strategy.

Serbia to be a key pocket of growth for Sopharma coupled with Bulgarian retail expansion with the acquisition of local pharmacy chain and the development of branded Sopharmacy network.

New capacity investments restarted to meet rising demand

In 2018, Sopharma started a BGN 30m investment in a new lyophilic production plant. The latter to double capacity of life-saving top seller drug methylprednisolone with current demand at 150% of existing facilities.

A new cytisine extraction facility also on the way to supply expected registration of smoking cessation drug Tabex in the US as well as expand its presence to the East.

Strategic partnership to open up the US market

After transferring Tabex marketing rights in the US to American clinical stage pharma company Achieve Life Sciences (ACHV US), Sopharma retained a longterm manufacturing agreement to supply cytisine – the key ingredient.

Achieve is expected to start Phase III clinical trial with the US Food and Drug Administration (FDA) in mid-2018 which if successful would lead to filing a New Drug Application to market the drug in the US.

Sopharma is entitled to royalties on sales in the US.

About Sopharma

Sopharma is a leading generic drugs producer in Bulgaria, 13% market share in volumes, with a portfolio of 210+ products, 15 of which original. Top 5 drugs, mostly original, generate 45% of the Company’s revenues. It also controls the biggest pharma wholesaler in Bulgaria – Sopharma Trading (SO5 BU), market leader on both pharmacy and hospital segments of the market.

Sopharma is also a blue chip on the Bulgarian Stock Exchange, second largest by market capitalization. It is among the most liquid stocks and part of the main index SOFIX.

The Group is a regular dividend payer with an average payout ratio of 28% for the last six years. In addition, at the General Shareholders Meeting in February 2018, shareholders approved semiannual dividend payments.

It has also an active buyback program recently revitalized as the stock was under pressure since mid-2017 due to a large portfolio investor seeking an exit. The latter opens an opportunity for institutional investors to enter at attractive multiples with liquidity to be boosted by a new employee stock ownership plan.

Check the latest equity research report on Sopharma in ELANA Online