Cheplapharm AG: CHEPLAPHARM AG PLANS FRANKFURT STOCK EXCHANGE LISTING IN Q1 2022

DGAP-News: Cheplapharm Arzneimittel GmbH / Key word(s): IPO
17.01.2022 / 07:46
The issuer is solely responsible for the content of this announcement.

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CHEPLAPHARM AG PLANS FRANKFURT STOCK EXCHANGE LISTING IN Q1 2022

- Cheplapharm is a leading specialty pharmaceuticals company headquartered in Greifswald, Germany, with an international footprint offering a broad and well-diversified product portfolio across over ten therapeutic areas

- Highly scalable and asset light business model focused on selecting and acquiring suitable products or product portfolios, managing the transfer of the authorizations and enhancing their outlook through life cycle management

- The investment focus of Cheplapharm lies on well-established, off-patent, branded legacy and niche originator pharmaceutical products with predictable cash flows from large pharmaceutical companies

- More than approx. €3.3 billion of cumulative product investments^[1] and over 2,500 marketing authorizations acquired globally^[2] demonstrate Cheplapharm's track record and strong relationships across well-known pharmaceutical companies

- Under its business model Cheplapharm distributes products in approx. 145 countries across six continents, predominantly through an extensive network of more than 100 distribution partners and a diversified network of more than 125 CMOs (contract manufacturing organization) ensuring high product quality and availability

- Cheplapharm has demonstrated exceptional and profitable growth, with an approx. 45% compound annual growth rate (CAGR) in revenue (2010-20) and a recurring EBITDA margin of >50% (2018-20). In the first nine months of 2021 Cheplapharm achieved revenues of €793 million and an EBITDA margin of 61%

- Cheplapharm has an extensive near-term acquisition pipeline to deliver strong and sustainable future growth, with the combined value of signed and closed acquisitions of 920 million in 2021 and over €1.8 billion additional assets under consideration in the near-term

- The Company targets gross proceeds from the sale of new shares of approximately €750 million

- The IPO and listing of its shares on the regulated market (Prime Standard) of the Frankfurt Stock Exchange is expected to take place in Q1 2022, subject to market conditions

Greifswald, 17 January 2022 - Cheplapharm AG (the "Company" and, together with its subsidiaries "Cheplapharm"), a leading specialty pharma platform for long-established pharma brands worldwide^[3], today announced its intention to list its shares on the regulated market (Prime Standard) of the Frankfurt Stock Exchange in Q1 2022, subject to market conditions. An initial public offering in Germany and private placements in certain jurisdictions outside Germany will comprise newly issued shares from a capital increase, and a potential secondary component from the existing shareholder Braun Beteiligungs GmbH.

The family-owned Company operates a highly scalable and asset-light business model focused on selecting and acquiring suitable pharmaceutical products or product portfolios, managing the transfer of the marketing authorisations and integrating these products into its established value chain. Since 2014, Cheplapharm has completed a significant number of product acquisitions from well-known pharmaceutical companies such as AstraZeneca, Bristol Myers Squibb, Roche, Sanofi and Takeda acquiring more than 125 products with a cumulative acquisition value of approximately €3.3 billion. Its revenue has grown with a compound annual growth rate ("CAGR") of approximately 45% between the year ended December 31, 2010 and the year ended December 31, 2020.^[4] Today, the Company combines more than 100 years of pharma experience in its senior management team and the know-how of over 450 employees^[5], generating revenues of €793 million in the first nine months 2021. For the year ended December 31, 2021, the Company estimates its revenue to be above €1 billion.

Over the years Cheplapharm has built a platform with proven processes that allow Cheplapharm to efficiently identify, evaluate and negotiate the acquisition of attractive products and product portfolios and efficiently integrate these into its existing global footprint. Cheplapharm focuses on investing in well-established branded legacy and niche originator pharmaceutical products which have been on the market for many years and for which patent protection typically expired more than ten years ago. As part of this plug and play platform strategy, product manufacturing is outsourced to a diverse network of more than 125 CMOs and suppliers, nearly all located in Europe. Likewise, distribution is outsourced to a global partner network with distribution capabilities in approximately 145 countries, enabling Cheplapharm to ensure product availability across existing markets.

"Given our specific business model and the status of our products, we have no R&D activities of our own. Therefore, we are not exposed to the significant risks and upfront investments that are associated with the development of new pharmaceutical products. This low-risk business model is further underpinned by a well-diversified sales base by geographic regions, therapeutic areas and products", Co-CEO Edeltraud Lafer explains. "In addition, given that our products have typically been on the market they tend to have highly visible and limited natural revenue regression which allows us to better forecast their future development and reflect this into our valuation assessment. These products also have very limited investment requirements and carry significant brand 'pull effect' with a high degree of familiarity built up over many years of promotion with both prescribers and patients."

Following its disciplined and proven investment process with investment criteria that have remained largely unchanged, Cheplapharm has grown its business significantly in recent years. Revenues increased from €309 million for the year ended December 31, 2018 to €640 million for the year ended December 31, 2020. For the nine months ended September 30, 2021 the Company achieved revenues of €793 million, an increase of over 60% relative to the figure for the same period of the previous year. Over the same period, earnings before income taxes, amortization, depreciation and impairment and net finance expenses ("EBITDA") have increased from €182 million in the year ended December 31, 2018 to €335 million in the year ended December 31, 2020 and to €484 million in the nine months ended September 30, 2021.

Cheplapharm's investment focused approach with limited capital expenditure requirements, no R&D and outsourced production and distribution support a scalable business model with high EBITDA margins and cash conversion rates. The EBITDA margin amounted to 59%, 53%, 52% and 61% in the years ended December 31, 2018, 2019 and 2020 and the nine months ended September 30, 2021 respectively. For the same periods, the Cash Conversion Rate^[6] stood at 56%, 63%, 79% and 60%, respectively.

Backed by the significant and growing number of off-patent products and the continued strategic reorientation of large pharmaceutical companies towards innovation, Cheplapharm sees significant opportunities to continue to deliver strong and sustainable growth also in the coming years. Sebastian Braun, Co-CEO, comments: "We are active in a growing market that offers attractive investment opportunities, and we believe that we are the partner of choice for leading global pharmaceutical companies seeking to divest off-patent pharmaceutical products. On a 5-year average until the end of the financial year 2020, we made investments with an average value of more than €550 million per year. For the future we expect that we will continue to find attractive investment opportunities as products with expected sales of approximately $140 billion in 2024 are estimated to fall within our acquisition window. Therefore, we plan to make investments totaling approximately €1.25 billion in aggregate in 2021 and 2022, and with a targeted annual investment spend of 42.5% to 50% of the prior year revenue in the mid-term. We expect this will result in three to six investments each year."

The Company's growth plans are underpinned by an extensive, tangible pipeline. For the year ended December 31, 2021, Cheplapharm has already closed investments with an aggregate volume of approximately €355 million and signed definitive agreements for investments of €565 million. The near-term investment pipeline consists of three product portfolios with estimated aggregate investment volume of between €640 million and €760 million. In addition, Cheplapharm is currently evaluating further eight portfolios with estimated aggregated revenues of over €600 million^[7] and an expected aggregated investment volume of more than €1.2 billion.

Family-owned business with an experienced management team

The Company's senior management team has been instrumental in the successful development of Cheplapharm, combining more than 100 years of experience in the pharmaceutical industry. Cheplapharm is a family-owned company and benefits from the long-term commitment of its shareholders, the Braun family, which include its Chief Executive Officer (Co-CEO), Sebastian Braun (41), and Chief Scientific Officer (CSO), Bianca Juha (38), who have consistently supported its growth through the reinvestment of retained earnings in the business in lieu of dividends. They are complemented by Co-CEO, Edeltraud Lafer (59), who has nearly 30 years of experience in the pharmaceutical industry, Chief Financial Officer (CFO), Jens Rothstein (54), who has served in that role since 2012, Chief Operating Officer (COO) Patrick König (39), and Chief Corporate Investment Officer (CIO) Kia Parssanedjad (47).^[8]

Details of the Offering

The Company targets gross proceeds from the listing of new shares of approximately €750 million. It intends to use the net proceeds to repay existing debt, and to finance future acquisitions of products and product portfolios. In addition, the planned offering may also include a placement of existing shares from the holdings of the current shareholder Braun Beteiligungs GmbH. The existing shareholder has agreed to a lock-up period of 360 days.

The Company plans to list the shares on the regulated market of the Frankfurt Stock Exchange with simultaneous admission to the sub-segment of the regulated market with additional post admission obligations (Prime Standard).

In the context of the offering, Credit Suisse, Deutsche Bank and J.P. Morgan are acting as Joint Global Coordinators and together with Barclays and Citigroup as Joint Bookrunners. COMMERZBANK, DZ BANK and ING Bank N.V. in cooperation with Stifel Europe Bank AG are acting as Co-Lead Managers.

Investor Relations Contact

About CHEPLAPHARM

CHEPLAPHARM is a fast-growing pharmaceutical companies in Europe, headquartered in Greifswald, Germany, offering branded and niche products in approximately 145 countries worldwide. The family-owned company specializes in selected active substances and indications and focuses on an international buy-and-build strategy.

Please refer to www.cheplapharm.com for additional information.

Press office:

CHEPLAPHARM Arzneimittel GmbH ǀ Ziegelhof 24 ǀ 17489 Greifswald ǀ presse(at)cheplapharm.com

DISCLAIMER

This release is not for distribution, directly or indirectly, in or into the United States (including its territories and possessions, any State of the United States and the District of Columbia), Australia, Canada, Japan or South Africa. It does not constitute or form a part of any offer or solicitation to purchase or subscribe for securities in the United States, Australia, Canada, Japan or South Africa or in any jurisdiction to whom or in which such offer or solicitation is unlawful. The shares mentioned herein have not been, and will not be, registered under the US Securities Act of 1933, as amended (the "Securities Act"). The shares may not be offered or sold in the United States, except pursuant to an exemption from the registration requirements of the Securities Act. There currently is, and there will be no public offer of shares of Cheplapharm AG (the "Company") in the United States. The shares may not be offered or sold in Australia, Canada, Japan or South Africa, or to, or for the account or benefit of, any national, resident or citizen of Australia, Canada, Japan or South Africa, subject to certain exceptions.

This release constitutes neither an offer to sell nor a solicitation to buy shares of the Company. Special attention is drawn here to that, in case such an offer were to be made, no investor will be allotted shares corresponding to 10% or more of the voting rights in the Company following implementation of the offering as German foreign trade law may require foreign investors to obtain government approval for the acquisition of shares of the Company if the acquirer directly or indirectly holds at least 10% of the voting rights of the Company following the acquisition. Details on German foreign investment control laws will be set out in a prospectus and/or offering circular. A public offer in Germany will be made solely on the basis of a securities prospectus which is yet to be published (including any supplements thereto, if any). An investment decision regarding shares of the Company should only be made on the basis of such securities prospectus. The securities prospectus will be published promptly upon approval by the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin)) and will be available free of charge on the website of Cheplapharm AG www.cheplapharm.com under the investor relations section. Approval of the prospectus by BaFin should not be understood as an endorsement of the securities.

This release may in the United Kingdom only be distributed to, and is only directed at, persons who are "qualified investors" within the meaning of Article 2 of Regulation (EU) 2017/1129 as it forms part of domestic law by virtue of the European Union (Withdrawal) Act 2018, and who are also (i) investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "Order"), or (ii) persons falling within Article 49(2)(a) to (d) of the Order (high net worth companies, unincorporated associations, etc.) (all such persons together being referred to as "Relevant Persons"). This release is directed only at Relevant Persons and must not be acted on or relied on by persons who are not Relevant Persons. Any investment or investment activity in shares of the Company is available only to Relevant Persons and will be engaged in only with Relevant Persons.

This release contains forward-looking statements. These statements are based on the current views, expectations, assumptions and information of the management of the Company. Forward-looking statements should not be construed as a promise of future results and developments and involve known and unknown risks and uncertainties. Various factors could cause actual future results, performance or events to differ materially from those described in these statements, and neither the Company nor any other person accepts any responsibility for the accuracy of the opinions expressed in this release or the underlying assumptions. The Company does not assume any obligations to update any forward-looking statements. Moreover, it should be noted that all forward looking statements only speak as of the date of this release and that neither the Company nor Credit Suisse Bank (Europe), S.A., Deutsche Bank Aktiengesellschaft, J.P. Morgan AG, Barclays Bank Ireland PLC, Citigroup Global Markets Europe AG, COMMERZBANK Aktiengesellschaft, DZ BANK AG Deutsche Zentral-Genossenschaftsbank and ING Bank N.V. (together, the "Underwriters") or their respective affiliates as defined under Rule 501(b) of Regulation D under the Securities Act ("affiliates") assume any obligation, except as required by law, to update any forward looking statement or to conform any such statement to actual events or developments.

Pursuant to a reorganisation by J.P. Morgan in accordance with Council Regulation (EC) No 2157/2001 of 8 October 2001 on the Statute for a European company (SE), from on or around 22 January 2022, J.P. Morgan AG will change its legal form to a European Company (Societas Europeaes - "SE") and will be known as J.P. Morgan SE.

The information contained in this release is for background purposes only and does not purport to be full or complete. No reliance may be placed by any person for any purpose on the information contained in this release or its accuracy, fairness or completeness.

Each of the Company and the Underwriters and their respective affiliates expressly disclaims any obligation or undertaking to update, review or revise any forward-looking statement contained in this release, whether as a result of new information, future developments or otherwise.

The Underwriters are acting exclusively for the Company and the selling shareholder and no-one else in connection with the planned offering of shares of the Company (the "Offering"). They will not regard any other person as their respective clients in relation to the Offering and will not be responsible to anyone other than the Company and the selling shareholder for providing the protections afforded to its clients, nor for providing advice in relation to the Offering, the contents of this announcement or any transaction, arrangement or other matter referred to herein.

The date of the admission to trading of the Company's shares on the regulated market segment (regulierter Markt) of the Frankfurt Stock Exchange (Frankfurter Wertpapierbörse) with simultaneous admission to the sub-segment of the regulated market with additional post-admission obligations (Prime Standard) of the Frankfurt Stock Exchange (Frankfurter Wertpapierbörse) (together, the "Admission") may be influenced by things such as market conditions. There is no guarantee that Admission will occur and no financial decision should be based on the Company's intentions in relation to Admission at this stage. Acquiring investments to which this release relates may expose an investor to a significant risk of losing all of the amount invested. Persons considering making such investments should consult an authorized person specializing in advising on such investments. This release does not constitute a recommendation concerning the Offering. The value of shares can decrease as well as increase. Potential investors should consult a professional advisor as to the suitability of the Offering for the person concerned.

In connection with the Offering, the Underwriters and their respective affiliates may take up a portion of the shares offered in the Offering as a principal position and in that capacity may retain, purchase, sell, offer to sell for their own accounts such shares and other securities of the Company or related investments in connection with the Offering or otherwise. Accordingly, references in the securities prospectus, once published, to the shares being offered, acquired, placed or otherwise dealt in should be read as including any issue or offer to, or acquisition, placing or dealing by, the Underwriters and their respective affiliates acting in such capacity. In addition, the Underwriters and their respective affiliates may enter into financing arrangements (including swaps or contracts for differences) with investors in connection with which the Underwriters and their respective affiliates may from time to time acquire, hold or dispose of shares of the Company. The Underwriters do not intend to disclose the extent of any such investment or transactions, other than in accordance with any legal or regulatory obligations to do so.

None of the Underwriters or any of their directors, officers, employees, advisers, agents respective affiliates or any of their affiliates' respective directors, officers, employees, advisers or agents accepts any responsibility or liability whatsoever for or makes any representation or warranty, express or implied, as to the truth, accuracy or completeness of the information in this release (or whether any information has been omitted from the release) or any other information relating to the Company, whether written, oral or in a visual or electronic form, and howsoever transmitted or made available, or for any loss howsoever arising from any use of this release or its contents or otherwise arising in connection therewith.

^[1] As of 30 September 2021.

^[2] Represents total number of marketing authorizations ("MAs") (transferred and pending) for all acquired products as of September 2021. Out of 2,500+ MAs acquired, ~1,600 MAs have been transferred as of September 2021. A product/ brand can have multiple MAs in a country corresponding to multiple dosage forms/ strengths.

^[3] Based on total number of publicly reported deals involving off-patent originator products divested by top-30 biopharma companies (from Jan 1, 2014 to May 14, 2021).

^[4] Based on Cheplapharm Arzneimittel GmbH's German GAAP financial statements for the year ended December 31, 2010 and the IFRS audited consolidated financial statements of Cheplapharm AG.

^[5] As of September 30, 2021

^[6] Cash Conversion Rate means Free Cash Flow divided by EBITDA where Free Cash Flow means cash flow from operating activities less

payments to acquire property, plant and equipment, less payments to acquire financial assets plus proceeds from disposal of financial assets, but before acquisitions of intangibles.

^[7] Based on information provided by the relevant sellers for the year ended December 31, 2020 and converted into euro at an assumed exchange rate

^[8] Patrick König and Kia Parssanedjad are not members of the management board of Cheplapharm AG, but of the subsidiary Cheplapharm Arzneimittel GmbH.

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