GS Lavipharm: What did the shareholders ask the management in view of AMK

By Vickys Kourlibini

The green light for the Share Capital Increase of up to 58 million euros, with cash payment and a right of preference in favor of old shareholders, given yesterday at the extraordinary general meeting of shareholders of Lavipharm. 59.22% of the shareholders attended the meeting, in person or by proxy.

The amount of AMK is considered large, which was admitted by the management of the listed company, together with the shareholders, to ask for clarifications in relation to its purpose, but also for the next steps of the company and its investment plan. It is noted that the initial position for the reasons of AMK was made by Telemachos Lavidas, executive member of the Board of Directors.

AMK comes at a time whenthe share of Lavipharm is traded under supervision on the AX, there is no access to financing and European funds, while the possibility of offsetting investments in research and development with automatic returns (the so-called investment clawback) is also lost, as a positive net position is required for this.

The tangible property of the Lavida family

The main point of Lavipharm’s investment planning is acquisition of an intangible asset, consisting of all the exclusive rights of ownership, production, marketing and distribution throughout the world, outside the USA. This is a transdermal product (patch) for administering the active medicinal substance of clonidine, aimed in patients with high blood pressure, as well as the existing commercial activity of the distribution of this product in Italy.

The patch belongs to the foreign company Lavipharm Group Holding SA of interests of the Lavida family and it is proposed to be transferred to the company due for sale against a total consideration in cash as follows: an amount of €34 million, a rate of 10% on net sales in Italy for a period of 15 years starting from the date of completion of the proposed acquisition and 5% of its net sales in the rest of the world, excluding the United States of America and Italy for a period of 15 years.

THE Telemachos Lavidas stated that if, after the distribution of new shares based on the exercised pre-emptive rights and pre-registration rights, there are still unallocated shares, he will participate with at least 1 million euros, answering a question of what will happen if there are unallocated shares.

Shareholders present also commented on that the disposal price may be higher than the stock market price of the company’s existing shares at the time of the termination of the right of preference in the Increase, as stated in the board report. The total difference between the nominal value of the new shares and any higher issue price will be credited to the “Difference from the issue of premium shares” account.

In addition, the management of the listed company stated that contacts are being made with investors, while there is also the “willingness for the entry of new shareholders”.

Finally, the fall of the share after the announcement of AMK, which yesterday was at 0.68 euros, when the high of the month was 1.44 euros (https://www.capital.gr/finance/quote/%ce% 9b%ce%91%ce%92%ce%99). “It’s not pleasant to be asked for an AMK” was said by management.

Why is AMK happening?

Telemachus Lavidas said that the company’s net debt is 35 million and that the profitability is currently going to service obligations and not to growth.

He added the stock should come out of surveillance and the pharma should have access to funding again. In the event that AMK is not done, it would take 5 to 6 years for the stock to come out of the surveillance process.

Competition in the pharmaceutical industry is intensifying and “anyone who does not invest will be extinguished”, he emphasized.

An additional goal is to increase EBIDTA to 10.5 million in 2024 and 18.5 million in 2026 from 6.2 million in 2021. Accordingly, the turnover targets are 72 million in 2024 and 94 million in 2026.

He added that at some point a dividend should be given to the shareholders.

The investment plan

Lavipharm has drawn up an investment plan of 28 million (24 will come from AMK as is the target) for the modernization of facilities, the purchase of machinery and the establishment of a research and development laboratory among others.

An amount of approximately €3.7 million will be allocated within 36 months from the completion of the Increase for construction works on the premises of the company, in particular for the construction of special premises of specific specifications in order to upgrade the building infrastructure, prepare premises for the installation new mechanical equipment, including costs for architectural, electrical and mechanical studies, costs for issuing permits.

An amount of approximately €8.7 million will be allocated for the purchase and installation of new mechanical equipment (machines and machine systems and additional equipment), in particular new production lines and improvement of old production lines for transdermal technology, including costs for smooth operation them, such as trial productions, consumption of raw and auxiliary materials, labor and general industrial.

1.4 million will be allocated within 24 months from the completion of the Increase for the purchase of instruments and other equipment for the creation of a new research and development laboratory.

An amount of approximately €8.7 million will be allocated within 36 months from the completion of the Increase to cover new product development costs, i.e. new pharmaceutical product marketing authorization costs and new product pilot production costs.

The 2021 results

Consolidated Sales, after deduction of rebates and clawbacks, amounted to EUR 39.7 million compared to EUR 37.6 million in 2020, showing an increase of 5.5%.

Gross Profit was EUR 15.9 million compared to EUR 16.2 million in 2020, down 2.1% due to increased liabilities for rebates and clawbacks.

EBITDA amounted to EUR 6.2 million compared to EUR 6.8 million in 2020. It is worth noting that 2021 EBITDA has been burdened by the formation of provisions for the impairment of receivables and inventories totaling EUR 1.1 million. Excluding the this amount, which is non-recurring, EBITDA amounted to 7.3 million euros, registering an increase of 7%.

Consolidated Profits Before Taxes amounted to Euro 2.7 million compared to Euro 3.3 million in 2020 and Profit after Taxes and minority interests amounted to Euro 1.7 million compared to Euro 2.1 million in the corresponding period last year . Equity improved by Euro 1.7 million.