EuroAPI's Restructuring and Strategic Divestments: A Pathway to Value Creation and Attractive Entry Points

In the ever-evolving landscape of the pharmaceutical ingredients sector, EuroAPI (EAPI) has embarked on a bold transformation journey with its FOCUS-27 plan, a four-year strategic initiative launched in February 2024. This plan represents more than just a cost-cutting exercise—it is a calculated repositioning of the company to focus on high-margin APIs, streamline operations, and unlock long-term value. For investors, the question is whether this aggressive restructuring, coupled with a seemingly undervalued stock, presents a compelling opportunity to capitalize on a turnaround story.

The FOCUS-27 Plan: A Multi-Faceted Strategy for Sustainable Growth

At the core of EuroAPI's FOCUS-27 plan are four pillars: portfolio refocusing, industrial footprint rationalization, operational efficiency, and strategic investment in high-value projects. The goal is to generate €75–80 million in annual run-rate incremental Core EBITDA by 2027, a target that, if achieved, would represent a significant leap from the company's 2024 performance.

Portfolio Refocusing
EuroAPI is phasing out 13 low-margin APIs, which accounted for €80 million in sales and negative €15 million in gross margin in 2023. Instead, the company is doubling down on high-potential segments like Peptides, Oligonucleotides, Corticosteroids, and Opiates. By 2024, highly differentiated APIs already represented 61% of its portfolio, up from 57% in 2023. This shift is critical, as large-molecule APIs and CDMO projects typically command higher margins and are less prone to commoditization.

Industrial Footprint Rationalization
The company is consolidating its operations to four core sites: Elbeuf, Vertolaye, Budapest, and Frankfurt, while divesting non-core assets like the Haverhill (UK) and Brindisi (Italy) sites. The Haverhill site was sold in June 2025 for €350 million, and Brindisi is expected to follow by 2027. These divestitures are not just about reducing costs—they are about aligning the industrial footprint with strategic priorities. For instance, the Elbeuf site is now a hub for bio-fermentation and Vitamin B12, while Frankfurt specializes in large molecules.

Operational Efficiency and Cost-Cutting
EuroAPI has already cut 180 positions in 2024, with a total target of 550 by 2027. Restructuring costs are estimated at €110–120 million over four years, but the company expects these to be offset by a 7–9% EBITDA margin by 2025, up from 5.5% in 2024. Key drivers include inventory reductions (Months on Hand improved from 7.6 to 6.9 in 2024) and a streamlined procurement function.

Strategic Investments in Growth
Despite the cost-cutting, EuroAPI is investing €350–400 million in CAPEX through 2027, with 59% allocated to growth projects. These include expanding capacities for Peptides, Oligonucleotides, and Corticosteroids, as well as a biomass boiler at Elbeuf to reduce CO2 emissions. These investments are not just about scaling—they are about positioning the company to meet rising demand in high-growth segments.

Financial Progress and Risks

EuroAPI's 2024 financials tell a story of painful but necessary restructuring. Net sales fell 10% to €911.9 million, and Core EBITDA dropped to €50.4 million (5.5% margin). However, the company's net debt was slashed from €171 million in 2023 to a net cash position of €25.2 million by year-end, driven by inventory reductions and Sanofi's €197.3 million hybrid bond investment. Free Cash Flow improved to €15 million, a stark contrast to the €132.2 million deficit in 2023.

Looking ahead, the company expects a rebound in 2025, with EBITDA margins returning to 7–9% and net sales stabilizing or slightly increasing. However, risks remain. The discontinuation of 13 APIs could lead to short-term volatility, and the CDMO business—while growing—still faces challenges in securing long-term contracts.

Valuation: Is the Stock Undervalued?

EuroAPI's stock has been a rollercoaster in 2025, trading between €2.26 and €4.54 over the past 52 weeks. Analysts remain divided, with a consensus price target of €3.04 (as of July 2025), implying a potential 4.47% upside from the current price of €3.22. However, this modest target reflects skepticism about the company's ability to achieve profitability in the near term.

Despite the cautious outlook, there are signs of undervaluation. The company's EV/EBITDA multiple is currently around 8x, well below the 12–15x range of peers in the API and CDMO space. This discount reflects the market's focus on short-term restructuring costs rather than the long-term value creation from the FOCUS-27 plan.

Investment Thesis: A High-Risk, High-Reward Opportunity

EuroAPI's FOCUS-27 plan is a textbook example of a value-creation strategy: divesting unprofitable assets, cutting costs, and investing in high-margin growth areas. For investors willing to stomach near-term volatility, the company's current valuation offers an attractive entry point.

Key catalysts to watch:
1. Successful execution of the 2025 EBITDA margin rebound.
2. Closure of the Brindisi divestiture and further CAPEX progress.
3. New CDMO contracts, particularly in large molecules.

Risks to consider:
- Delays in restructuring or divestitures.
- Slower-than-expected growth in high-margin APIs.
- Regulatory or operational issues at remaining sites.

Conclusion: Positioning for the Long Term

EuroAPI's FOCUS-27 plan is a bold, well-structured transformation that could unlock significant value if executed effectively. While the stock remains unprofitable in the near term, the company's strategic clarity, financial discipline, and focus on high-growth segments make it a compelling case for patient investors. For those who believe in the power of restructuring to drive long-term value, EuroAPI offers a rare opportunity to invest in a turnaround story at a discount.