Ypsomed Holding AG: A High-Growth Opportunity Amid Strategic Restructuring

Ypsomed Holding AG (VTX:YPSN), a leader in drug delivery systems and diabetes care solutions, presents a compelling investment case despite recent revenue downgrades for its 2026 fiscal year. The company's aggressive focus on high-margin segments, coupled with strong earnings revisions and strategic capital investments, positions it as a prime candidate for long-term growth. Here's why investors should consider YPSN as an opportunistic entry point.

Strategic Shifts Boost Profitability

Ypsomed's decision to divest its Diabetes Care division in April 2025 marks a pivotal strategic move to concentrate resources on its core Delivery Systems business, which commands higher margins and faster growth. This division reported a 30.4% revenue surge in FY2024/25, driven by commercial autoinjector sales (up 49.8%) and project-based pen and autoinjector contracts (CHF98.5m). The divestiture also streamlined operations, enabling Ypsomed to accelerate investments in production capacity:
- A new plant in Changzhou, China, opening in June 2025, and a fourth production hall in Schwerin, Germany, aim to meet rising demand for GLP-1-based drug delivery systems.
- The company's 2030 investment program, totaling over CHF100m, targets scalability and efficiency gains, reinforcing its competitive edge in insulin pumps and autoinjectors.

Earnings Resilience and ROE Turnaround

While Ypsomed's 2025 ROE dropped to 0 (from 0.09 in 2024), this reflects one-time effects from the Diabetes Care sale and restructuring. Analysts project a rebound to 19.8% by 2028, aligning with its 32.6% annual earnings growth forecast, which outpaces both the U.S. market (14.6%) and Swiss Medical Equipment peers (13.0%). Key catalysts include:
- GLP-1 partnerships: Ypsomed's autoinjectors are critical for fast-growing GLP-1 weight-loss and diabetes therapies, with commercial sales up 50% in 2024/25.
- mylife YpsoPump adoption: The insulin pump's sales surged 81%, with 70,000 users of its mylife Loop feature by March 2025, underscoring its dominance in personalized diabetes management.

Valuation: A Bargain at Current Levels?

Despite a PE ratio of 63.86x, a premium to the Swiss Medical Equipment sector's 37x average, Ypsomed's valuation appears justified by its growth trajectory. The consensus CHF430.33 price target (as of June 2025) implies a +6.39% upside from current levels, with analysts citing:
- Strong cash flow: FY2024/25 net profit rose 11.6% to CHF87.5m, while EBIT hit CHF140.5m (adjusted for one-off costs).
- Dividend consistency: A proposed CHF2.20 dividend (a 10% increase) reflects financial discipline, with payouts maintained for 23 consecutive years.

Narrowing Gap with Peers: A Growth Play

Ypsomed's 10.4% annual revenue growth outpaces the Swiss Medical Equipment industry's 7.6% forecast, while its 32.6% EPS growth dwarfs peer averages. While the stock's volatility (beta >1) remains a risk, its strategic focus on high-margin Delivery Systems and geographic diversification (40% of sales from Asia-Pacific) mitigate execution risks.

Technicals and Risks

• Price action: YPSN closed at CHF404.50 on June 20, 2025, with a 3-month +28.12% predicted return and support at CHF380.00.
• Downside risks: Supply chain disruptions, regulatory hurdles for new products, and geopolitical tensions could pressure margins.

Investment Thesis

Ypsomed's strategic realignment, robust earnings growth, and undervalued peer-relative upside make it an attractive long-term play. While near-term volatility is inevitable, the stock's Moderate Buy consensus, dividend stability, and 2030 growth roadmap suggest it's poised to outperform.

Recommendation: Investors with a 2–3 year horizon should consider accumulating YPSN shares at current levels, particularly as the Changzhou plant comes online and GLP-1 demand continues to soar.

Final Take: Ypsomed's focus on high-margin drug delivery systems and its disciplined capital allocation strategy position it to capitalize on secular trends in diabetes and weight-management therapies. While valuation multiples are rich, the stock's growth profile and narrowing gap with peers justify its status as a buy.