Bowtie German Bidco (Nextpharma)

Overview Key strengths Key risks Solid revenue visibility, with contracts averaging three years. Limited scale in the contract development and manufacturing company (CDMO) market. Good product diversity and a broad range of dosage forms, with dedicated manufacturing sites. The CDMO market remains fragmented and highly competitive. Long-standing customer relationships and diversified customer base. Lack of exposure to more complex and profitable technologies (such as injectables and biosimilars). Good manufacturing footprint with 10 sites across Europe. Limited pricing power restrains negotiations with customers, mitigated by successful input costs pass through demonstrated in the current environment. Adjusted EBITDA of about 16%-17% in 2022 in S&P Global Ratings' base case, supported by some pass through of material costs. Geographical concentration in Europe with

...We assume the ongoing project pipeline and enhanced operational efficiency will continue to boost Nextpharma's profitability until 2024. Despite increasing overhead costs and high absenteeism, alongside the impact of inflation, Nextpharma performed solidly in 2022; we expect adjusted EBITDA of around 16.0%-16.5% for year-end 2022. The group has been able to pass through its input cost price increases to its customers, despite some time lag, thanks to built-in contracts clauses as well as regular negotiation and price transparency. In 2023, we assume elevated material, packaging, and energy costs will keep pressuring margins, while increased operating costs related to the ramp-up of the acquired Asker site will also temporarily squeeze margins. As such, we project adjusted EBITDA of about 14.5%-15.5% for 2023. This considers the inflationary pressure on material costs and high volatility in the market--despite pass-through to customers with some time lag, which would fully mitigate cost...

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