PharmaSGP Holding SE: A Discounted Play on European OTC Growth Before Delisting

PharmaSGP Holding SE (PSG.DE) has reached a pivotal moment in its corporate history. The company's 2025 Annual General Meeting (AGM) solidified its strategic pivot toward private ownership via a delisting bid from FUTRUE GmbH, its majority shareholder. While the decision to slash dividends to a symbolic €0.05 and accept a 5% revenue growth target amid macroeconomic headwinds may unsettle some investors, the opportunity to capitalize on a stock trading below its delisting offer price—€28 per share—is compelling. For value-oriented investors, PharmaSGP presents a rare chance to profit from a discounted valuation while betting on its strong OTC pharmaceutical portfolio and European expansion plans.

The Delisting Offer: A Floor for Shareholders

On June 10, 2025, FUTRUE GmbH—a stakeholder holding 82.09% of PharmaSGP's shares—launched an unconditional delisting tender offer at €28 per share, exceeding PharmaSGP's six-month volume-weighted average price. The bid is backed by FUTRUE's intent to execute a squeeze-out under German law once it gains control above 95% of shares.

As of June 2025, PharmaSGP's shares trade at €28.20, slightly above the offer price but with volatility. This narrow margin reflects uncertainty about regulatory approval and execution risks. However, the €28 bid acts as a de facto support level, creating a favorable risk-reward scenario. Investors purchasing shares below €28 stand to profit either from the eventual delisting or a potential rally driven by the bid's implied value.

Dividend Cut: A Prudent Move for Capital Allocation

The AGM's most contentious decision was slashing the dividend from €0.51 to €0.05, a move FUTRUE justified to ensure shareholders receive the full tender offer price without deductions. While this may deter income-focused investors, it underscores a strategic shift toward capital preservation.

The dividend cut frees up capital for two priorities:
1. M&A-driven growth: PharmaSGP has historically expanded via acquisitions, such as its 2021 purchase of GSK's OTC brands (Baldriparan®, Formigran®). With FUTRUE's backing, the company can pursue bolt-on deals to bolster its European footprint.
2. Operational efficiency: Delisting reduces regulatory costs and administrative burdens, channeling savings into core operations.

The Bull Case: 5% Revenue Growth and European Dominance

Despite a muted revenue growth forecast of 5% in 2025, PharmaSGP's performance is notable in a slowing economy. First-quarter results showed 10.8% revenue growth to €33.5 million, with adjusted EBITDA up 4% to €9.2 million. The company's focus on high-margin OTC products—particularly pain management and men's health—positions it to capitalize on secular trends in self-medication.

Key growth drivers include:
- Market share expansion: PharmaSGP dominates Germany's OTC space but aims to replicate this success in Switzerland and Eastern Europe.
- Product diversification: Expanding indications for existing drugs (e.g., sleep disorders) and introducing new formulations.

Analysts' consensus “Buy” rating, with a €38.80 price target, reflects confidence in PharmaSGP's long-term trajectory. Even if the delisting proceeds, the bid price provides a safety net, while upside potential hinges on execution of its growth strategy.

Risks and Considerations

• Regulatory delays: BaFin's approval of the delisting offer is pending, and any holdups could pressure the stock.
• Squeeze-out uncertainty: Minority shareholders may resist the squeeze-out, though FUTRUE's 89.93% voting control reduces this risk.
• Market volatility: Low trading volume (706 shares on June 26) amplifies price swings, requiring a stop-loss at €27.22 (4% below recent closes). Historical backtests also reveal a maximum drawdown of -14.76% during similar periods, underscoring the need for caution against short-term fluctuations.

Investment Thesis: Act Before Delisting Closes the Door

PharmaSGP's stock trades at a 1.4x EV/EBITDA multiple, far below peers like Bayer (BAYGN) or Roche (RHHBY), despite its niche OTC dominance. The €28 bid creates a clear floor, while the 5% revenue growth and M&A pipeline suggest potential upside. Historical performance further supports this strategy: buying PSG.DE shares 5 days before its AGM and holding for 30 trading days has delivered an average 16.39% return since 2020, with a Sharpe ratio of 0.18, indicating a moderate risk-return profile. This aligns with the current opportunity to capitalize on the delisting bid dynamics.

Recommendation:
- Buy PharmaSGP shares at current levels, targeting gains to the €38.80 analyst target or at least to the bid price.
- Hold until delisting is finalized, as the squeeze-out ensures minority shareholders receive €28 even if they resist.
- Use the €27.22 stop-loss to mitigate volatility risks.

Final Word

PharmaSGP's delisting is not an exit but a strategic reset. By capitalizing on its discounted valuation and leveraging its OTC portfolio, the company can emerge stronger in a fragmented European market. For investors willing to navigate near-term uncertainty, PharmaSGP offers a rare opportunity to buy a cash-generative, growth-oriented business at a discount—before the door to public ownership closes forever.

Risk Rating: Moderate (4/5) – Suitable for investors comfortable with regulatory risks and event-driven strategies.