Veropharm has released its financial results for 1Q 2008. In line with the press-statement, the company's revenue grew by 44% in US dollar terms in the reporting period, to USD 34.7 million. Sales of prescription medicines rose steadily by 66%, while the segment's revenue amounted to USD 20.7 million. However, despite the quick sales upturn, outrunning growth in the cost of sales brought Veropharm's gross margin down to 62.9%.
Table. Veropharm: Key Financials FY 2007, USD mn
| | 1Q2007 | 1Q2008 | 1Q2008/1Q2007 |
|---|
| Revenue | 24.1 | 34.7 | 44.0% |
| Cost of production | 8.7 | 12.9 | 47.6% |
| Gross profit | 15.4 | 21.8 | 41.8% |
| Gross margin | 63.9% | 62.9% | |
| Business, general and administrative expenses | 9.09 | 13.70 | 50.8% |
| Operating profit | 6.31 | 8.13 | 28.8% |
| Operating margin | 26.2% | 23.4% | |
| EBITDA | 7.1 | 9.2 | 29.6% |
| EBITDA margin | 29.5% | 26.5% | |
| Net profit | 5.5 | 6.3 | 14.5% |
| Net margin | 22.8% | 18.2% | |
Source: company data, Finam estimates
We are downbeat on the pharmaceutical company's 1Q 08 report. Although the share of the remunerative prescription medicine segment in the company's total revenue advanced to 62%, rapid growth of the company's expenses impair its margin indicators. However, Veropharm's 1Q 2008 gross margin was better than that for the whole of FY 2007.
In line with our estimates, the fair value of Veropharm shares is USD 48.5 per share, an 11% downside to the current market valuation.
11.8
12.74
