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Gerresheimer is a German company that manufactures containers for the pharmaceutical industry. So far, nothing very original. The portfolio includes simple packaging, such as plastic bottles and vials, glass ampoules, but also more sophisticated products, including pumps, syringes, inhalers and injection pens.
This health equipment manufacturer will celebrate its 160th birthday next year. In its trophy cabinet, for example, we find the title of the world’s largest manufacturer of glass bottles at the end of the 19th century. Thanks to beer, back then. Over the years, the activity shifted towards the pharmaceutical industry, in Germany, then internationally. The development was not dazzling: things were built very slowly, until the IPO in 2007, under the leadership of the then owner, Blackstone. The American fund, more by chance than by foresight, settled the adventure just before the start of the slide that would lead to the financial crisis of 2008. It then took five years for Gerresheimer to find its introductory course, almost an eternity.
What followed wasn’t particularly exciting either. Turnover rose from 1.3 to 1.4 billion euros between 2013 and 2021. A snail’s growth, therefore, which did not prevent the company from releasing correct margins and a small dividend, masking inconsistent cash generation and ever-increasing debt. It must be said that the sector is highly capital intensive, which means that significant structural expenditure is required to generate income.
Weight loss, a new global eldorado
Difficult to move the crowds of investors with such a balance sheet. But things changed at the end of 2022, when the share had fallen back to around 45 euros, not so far, ultimately, from the IPO price fifteen years earlier. During a strategic presentation, management revealed that it had signed two large contracts in the field of diabetes and the fight against obesity, for syringes and self-injection devices. Analysts quickly understood that Gerresheimer had just entered the small papers of the laboratories which have the wind in their sails, thanks to the slimming variations of their GLP-1 treatments against diabetes. It is these contracts that will finally allow revenues to take off, since they will ultimately represent several hundred million euros per year. Turnover is expected to increase from 1.8 billion euros last year to 2.5 billion euros in 2025.
Return to favor of profitability
In the meantime, the company must invest heavily in its industrial capacities, which explains the low level of free cash. Once this phase has been digested, the results should take the upward slope, from 2024 but especially in 2025, with a return to the best historical profitability levels, which date from the 2015-2017 period. The change in gear has not gone unnoticed on the stock market, which has brought the stock to new highs in recent weeks. It’s probably deserved, given Gerresheimer’s move upmarket and his exposure to the colossal obesity treatment market.
It is now necessary to match promises and reality, but the risk is relatively limited given the company’s experience in pharmaceutical industrial processes. The real unknown is the future growth of weight loss drugs. By linking its development to that of this sector where expectations are high, Gerresheimer has become more sensitive to the scientific debates surrounding these innovative and, at times, controversial treatments. As in diets, the yoyo effect on the price cannot be ruled out.