While some doctors are reticent and the staff in some in-service pharmacies are not yet adequately trained, companies such as Shop Apotheke Europe NV have been hit hard for a long time. About the company, what the stock is doing and what analysts are saying.
WHAT HAPPENS AT THE STORE PHARMACY:
The online group had actually focused on the originally planned start date for the e-prescription in Germany on 1 January 2022. A larger and highly automated logistics center was established in Sevenum in the Netherlands to be able to handle expected order volumes quickly and easily. Work has also been done on delivery: Everyone who needs an important medicine should have it delivered the same day or no later than the next day, or they should be able to pick it up at a stationary partner pharmacy. Shop Apotheke recently took over the Berlin start-up First A, an express delivery service for pharmacies.
Not only Dutch, but online pharmacies in general also rely on the “take away effect” when it comes to e-prescriptions: Anyone who surfs through the pages may also order products that do not require a prescription when submitting the prescription, according to to the calculation. Here, the lures entice with some strong discounts. The store pharmacy also wants to retain customers by offering video consultation with a doctor and with so-called red dots, which can be picked up at a store and later used to pay.
Company manager Stefan Feltens never gets tired of emphasizing how important the introduction of digital drug prescriptions in Germany is for the group. Although e-prescriptions are already available in some neighboring countries, Germany in particular is considered a lucrative market: Doctors pass on around 500 million prescriptions in paper form to their patients in this country every year – Shop Apotheke hopes for a large part of the pie.
But the e-prescription project in Germany, which has been in the works for years, is having a hard time getting started. The planned start at the turn of the year failed due to insufficient comprehensive technology – and ultimately probably due to the opposition of many participants. Doctors in particular gave up because they feared too much bureaucracy and technological obstacles in their practice. But there were also reservations among health insurance companies and inpatient pharmacists.
Only recently did the shareholders of Gematik, the company responsible for the project, decide on a new schedule. Among other things, all pharmacies must accept e-prescriptions from 1 September. For the time being, however, there is no obligation for doctors. However, it is hoped that more and more doctors and clinics throughout Germany will join the two pilot regions of Westphalia-Lippe and Schleswig-Holstein. From December, the e-prescription will then be binding if Gematik shareholders consider the regional introduction a success.
Federal Health Minister Karl Lauterbach (SPD) recently praised the e-prescription as a “benefit for patients, doctors and pharmacists”. So far, however, the preparations for this at Shop Apotheke have resulted in one thing above all: high costs. Last year, the recruitment of new employees for logistics hit the office, at the same time there were personnel-related bottlenecks in the processing of orders – and that before the hoped-for e-prescription trust.
The Dutch – who were in fact among the winners of the crisis in the pandemic – slipped into the red in 2021 and had to cut their forecasts several times. The company also ran an operating loss in the first quarter of 2022, and in the worst case, a negative operating margin is also expected for the year as a whole.
At the same time, Shop Apotheke is growing strongly – but above all through the business of over-the-counter products. A look at the first quarter shows how well the company can use the e-prescription. In the German-speaking countries, growth was not only meager for the first three months; Sales of prescription drugs even fell by almost a third compared to the same period last year, when people had ordered even more online because of the corona.
At the beginning of the year, the biggest driving force came from the international markets, where the group is expanding. However, this will probably also cost a lot in the beginning: for example, the first distribution center is being built outside the Netherlands near Milan.
WHAT THE PART DOES:
The Korona pandemic gave the share price, which was more or less dying until February 2020, a strong boost. In February 2021, it rose to almost 250 euros. Compared with the investment price of EUR 28 at the stock exchange listing in 2016, this corresponds to an increase of almost 800 percent. But with the easing of the Corona crisis, the high expansion costs and, above all, the delays in the e-prescription, many investors withdrew. This was followed in September last year by the descent from MDAX to SDAX.
Then, in 2022, there was a general market downturn in the wake of the Ukraine war and high inflation. It went down to mid-April, to a two-year low of just over 65 euros.
The progress with e-prescriptions then led to an improvement, which peaked at the beginning of June at just over 105 euros. However, investors were not entirely happy with the timetable for the introduction. Most recently, the price dropped slightly to currently around 84 euros. In 2022 alone, the losses will amount to around a quarter.
Nevertheless: The newspapers are still listed well above the issue price and higher than before the corona pandemic. This means that the store pharmacy today has a market value of around 1.5 billion euros. Measured in market value, the company is thus one of the major midfielders in the SDAX small-cap index. The Swiss DocMorris-Mother Zur Rose, whose share price also fell this year, has a market value of less than one billion euros.
WHAT ANALYSTS SAY:
The majority of analysts registered by dpa-AFX and the news agency Bloomberg since the figures for the first quarter were presented are positive. Ten buy votes are against one neutral vote and two sales recommendations. The average price target of just over 133 euros is almost 60 per cent above the current share price.
Baader analyst Volker Bosse first gave the thumbs up in early May and upgraded the shares to “buy” with higher price targets. He sees the gradual introduction of the e-prescription as a key driver for the stock. He also considers online pharmacies to be generally quite insensitive to inflation and other economic consequences of the Ukraine war – in the end, it is unlikely that sick people will reduce their spending on medicines.
However, the issue of binding e-prescriptions is a concern for some analysts, including Warburg analyst Michael Heider: Because if doctors are not initially required to do so, it is unclear how many prescriptions will actually be issued in digital form. The expert criticized that there is still no clear timetable here. This is bad news for online pharmacies. But he also sees great potential for companies such as Shop Apotheke.
True skeptics, however, cast doubt on the bright prospects and point out, for example, that physical pharmacies are closer to the customer. In addition, Internet users can only to a limited extent score with price advantages, since discounts on prescription drugs are now prohibited by law. The Kepler experts also see that the physical pharmacies have a clear structural advantage over providers such as in-store pharmacies. They do not believe that the e-prescription will change anything and therefore recommend selling the papers.
On Friday, the newspaper benefited significantly from the XETRA trade: at times it rose 5.33 percent to 88.18 EUR.
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