Grifols closed the 2019 financial year with record high revenues of EUR 5,099 million, a growth of 13.6% and 9.2% cc1. The company’s long-term sustainable strategy led to growth in all of its divisions and geographic regions where it operates.
Over the last years, the company’s strategic investments to increase its access to plasma, as well as efforts to boost its sales activities and operations, all contributed to the group’s solid performance.
The Bioscience Division continued to serve as Grifols’ main engine for growth. The division increased revenues by 13.6% (8.9% cc) to EUR 3,994 million. Sales of immunoglobulins (including specialty immunoglobulins), were especially strong, growing by double digits, particularly in the United States. Also noteworthy was the recovery of albumin sales in China following the renewal of certain licenses and the upward trend in alpha-1 antitrypsin sales.
Diagnostic Division sales grew by 4.5% (1.1% cc) to EUR 734 million. The transfusion medicine line recorded higher sales, with NAT donor-screening solutions and recombinant proteins leading growth. The Hospital Division expanded by 12.5% (12.1% cc) to EUR 134 million, with growth in all business lines. The Bio Supplies Division achieved EUR 267 million in revenues, growing by 59.6% (54.1% cc).
The company attained higher operating margins throughout the fiscal year. As of December 31, the gross margin was 45.9% (45.7% in 2018), driven by solid demand of the main plasma proteins, enhanced production efficiencies and a stable cost of plasma. The underlying gross margin2 was 47.4% (46.4% in 2018). Meanwhile, the reported EBITDA increased by 17.3% to EUR 1,434 million, denoting a 28.1% margin (27.3% in 2018). The underlying EBITDA margin represents 28.6% of revenues (27.7% in 2018).
In 2019, Grifols continued to promote innovation and productive investments as key drivers of its long-term, sustainable growth. Net R+D+i investments increased by 12.1% to EUR 329 million, including internal, external and investee-led projects. Grifols also advanced in its capital investments plan, allocating a total of EUR 332 million to expedite the expansion of the Bioscience Division’s production capacity and the growth of the other divisions.
The company grew by 4.8% in 2019, achieving EUR 625 million in net profits.
(1) Operative or constant currency (cc) excludes exchange rate variations over the year.
(2) Excludes the impact of third-party plasma sales by Haema and Biotest.
The Bioscience Division achieved record sales of EUR 3,994 million in 2019. Revenue growth stemmed from strategic investments and efforts in recent years to increase the company’s access to plasma and successfully meet the rising demand of the main plasma proteins.
Demand for immunoglobulin remains strong in all regions, especially in the U.S. and main European Union (EU) markets. These markets, in addition to using immunoglobulins to treat primary immunodeficiencies, also utilize them to treat secondary immunodeficiencies and neurological diseases like chronic inflammatory demyelinating polyneuropathy (CIPD). Sales of this plasma protein recorded double-digit growth in 2019.
Albumin sales recovered throughout the year, particularly in the second half. Double-digit growth was the result of strong demand in China, the U.S. and various EU countries. The Chinese market currently leads sales for the plasma protein and continues to hold great growth potential.
Alpha-1 antitrypsin revenues continue to grow. Market penetration of this plasma protein grew in the U.S. and main EU markets thanks to effective sales strategies and an upsurge in the number of diagnosed patients. Grifols continues its efforts to boost the rate of diagnosis of alpha-1 antitrypsin deficiency by developing innovative solutions like AlphaKitTM (blood test) and AlphaIDTM (bucal swab).
The sales trend of factor VIII moderated its decline in the last quarter of 2019. In the new market scenario FVIII/VWF concentrates still play a key role to prevent and treat bleeds, and for the prevention and eradication of inhibitors.
The company’s commitment to ensure product availability for all patients and the efforts to position factor VIII products in the new competitive landscape led to a stabilization in our sales volume
Grifols continues to promote its specialty proteins to enhance its differential product portfolio. Strong sales of specialty hyperimmunoglobulin, most notably the new formulation of its anti-rabies immunoglobulin (HyperRAB®), contributed to the division’s revenue growth.
Grifols is the worldwide leader in transfusion diagnostics, the division’s main engine for growth in 2019. This business area includes NAT donor-screening diagnostics (Procleix® NAT Solutions), blood-typing solutions and the manufacture of recombinant antigens for immunoassays.
Sales of NAT donor-screening solutions remained stable due to an increase in plasma donations and greater market penetration in EMEA and Japan. Over the last 12 months, the division continued to consolidate its global-expansion strategy, opening up new markets for its NAT-technology solutions in Malta, Hungary, Slovakia, Bulgaria, Peru, Panama and Ecuador. The company also broadened its product portfolio by incorporating new FDA-approved reagents to detect babesiosis. After obtaining the CE mark, the division will launch its innovative Procleix® Panther® with ART (Automated Ready Technology), designed to improve workflow efficiencies in laboratories.
Sales of the blood-typing line grew by double digits. The product portfolio includes analyzers (Wadiana®, Erytra® and Erytra Eflexys®), gel cards (DG-Gel®) and reagents. Sales were especially strong in China, a market with significant growth potential; the U.S., the main market for this product line thanks to a solid sales strategy and successful strategic investments; Latin America, and specific markets in Asia and Europe. Grifols also reinforced its presence in Africa with the installation of the first Erytra Eflexis® in Tunisia.
Grifols continues its efforts to consolidate its line of recombinant proteins for immunoassays. The agreement with PCL will further consolidate this business line.
Sales of blood-extraction bags grew significantly, a segment that will expand following the start-up of operations in the new Brazil plant.
Revenues of specialty diagnostics remain stable, with sales expected to grow with the gradual expansion of the clinical diagnostics portfolio. As such, it is important to highlight the FDA approvals of QNext®, a coagulometer developed in-house (DG®-PT, thromboplastin), and one of the main reagents to promote hemostasis. With this latter approval, Grifols became the first company in more than 15 years to earn authorization in the U.S. market to sell instruments and reagents for routine hemostasis testing.
The company remains focused on developing new diagnostic tests for personalized medicine through Progenika Biopharma. In 2019, the company obtained the CE mark and marketing approval in Canada and Australia for new references in the Promonitor series: Promonitor® UTK and Promonitor® ANTI-UTK. These tests permit treatment monitoring using the biological drug ustekinumab by determining its levels in the blood (Promonitor® UTK) and anti-ustekinumab antibody levels (Promonitor® ANTI-UTK).
Sales increased in 2019 across all of the division’s business lines, especially the Pharmatech line in the U.S. This business line offers comprehensive solutions for operational pharmacy, including the inclusiv® product portfolio, which includes equipment, software and services to improve safety and quality in compounded sterile preparations. . With a double-digit upturn in sales, this line represents an important growth lever for the division, fueled by the MedKeeper® and Kiro Grifols® technology solutions.
Grifols is a leading supplier of technology and services for hospitals, clinics and specialized centers for the manufacture of medicines. The launch of its leading-edge system for automated compounding of intravenous treatments (KIRO Fill®) and software enhancements to the workflow platform for intravenous preparations (PharmacyKeeper) optimize hospital-pharmacy operations by affording greater accruacy and safety in the prepraration of intravenous (IV) medications. This advancement improves patient safety and reduces reliance on manual processes.
Sales of IV solutions grew as a result of U.S. demand for Grifols’ physiological saline solution (manufactured in the Murcia, Spain plant) and its use in the company’s network of plasma centers. Sales of the Nutrition and Medical Devices lines also increased, accompanied by an upturn in third-party manufacturing services.
Grifols is a leading supplier of technology and services for hospitals, clinics and specialized centers for the manufacture of medicines.
The launch of its leading-edge system for automated compounding of intravenous treatments (KIRO Fill®) and software enhancements to the workflow platform for intravenous preparations (PharmacyKeeper) optimize hospital-pharmacy operations by affording greater autonomy in the syringe-filling process of non-hazardous intravenous (IV) medications. This advancement improves patient safety and reduces reliance on manual processes.
This division primarily oversees the sale of biological products for non-therapeutic uses and third-party plasma sales channeled through Haema and Biotest, which represent EUR 180 million.
Grifols’ solid performance and positive cash flow trend helped reinforce the balance sheet. Consolidated assets as of December 31, 2019 totaled EUR 15,542.6 million (EUR 12,477.0 million in 2018). This variation is due primarily to the growth of the Bioscience Division including the strategic build-up of inventories, which expanded both organically and via corporate transactions, as well as capital expenditures and R+D+i investments.
The optimization of working capital remains a priority to strengthen the company’s financial position.
Inventory levels increased to EUR 2,342.6 million, with a turnover of 310 days compared to 292 days in December 2018 following the implementation of several initiatives to better anticipate and meet the solid demand for plasma-derived products.
The average collection period remains stable to 26 days (22 days in 2018). The average payment period is 60 days, a decrease from the 65-day period in 2018.
With regard to the group’s Spanish subsidiaries, the average payment period to suppliers was 72.9 days, similar to last year’s 72.6 days.
Grifols’ cash position was EUR 742 million (EUR 1,033.8 million in 2018) on December 31, 2019. The company maintained a high and sustainable operational cash-flow generation in the current context of growth, the closings of corporate transactions and higher R+D+i investments. The EUR 568.9 million reported in 2019 (EUR 737.4 million in 2018) enabled the company to increase its CAPEX investments to EUR 332.2 million (EUR 252.2 million in 2018) and net R+D+i investments to EUR 329.0 million (EUR 291.4 million in 2018). The company remains firmly committed to future growth and its long-term strategic vision.
The company’s equity was EUR 6,845,768 thousands as of December 31, 2019. The share capital includes 426,129,798 common shares (Class A), with a nominal value of EUR 0.25 per share, and 261,425,110 non-voting shares (Class B), with a nominal value of EUR 0.05 per share.
Grifols’ ordinary shares (Class A) are listed on the Spanish Stock Market and form part of the Ibex-35, while its non-voting shares (Class B) are traded on both the Spanish Stock Exchange (GRF.P) and the U.S. NASDAQ exchange (GRFS) via ADRs (American Depositary Receipts).
In 2019, two dividend payments totaling EUR 238.7 million were distributed. In the second quarter of 2019, a second payment was made as a final dividend related to 2018 earnings. In December 2019, an interim dividend of EUR 136.8 million was paid based on 2019 earnings. Grifols remains committed to compensating its shareholders with dividend (pay-out of 40%).
Grifols meets its liquidity and capital requirements using resources generated from its operating activities and long-term external financing. As of December 31, 2019, Grifols’ cash position was EUR 742 million and its liquidity position was EUR 1,274 million.
The main impacts are as follow:
Cash flows from investment activities totaled EUR 548.8 million. The most important variations were due to the following operations:
Cash flow for financing activities totaled EUR 332.3 million in 2019, primarily comprising dividend payouts of EUR 238.7 million.
Excluding the impact of IFRS 16*, as of December 31, 2019, Grifols’ net financial debt totaled EUR 5,725 million, including EUR 742 million in cash. The company has EUR 532 million in undrawn lines of credit, increasing its liquidity position to EUR 1,274 million.
The company progressively improved its debt-to-equity ratios in 2019, attaining a net debt leverage ratio of 4.17x in December 2019 compared to 4.78x at Q1 2019.
Effective financial management remains a key priority for Grifols in order to optimize and reduce its debt levels following its strategic investments in recent years. To this end, the company maintains sustainable operational levels and a solid operating cash generation. Cash generation reached EUR 568.9 million in 2019, allowing Grifols to carry out its planned investments and meet anticipated increases in demand.
Initiated on October 28, 2019, Grifols’ debt-refinancing process was concluded in record time on November 15 for EUR 5,800 million. Well-accepted by markets, the new financing includes Term Loan B (TLB) for USD 2,500 million and EUR 1,360 million, both aimed at institutional investors; the issue of two bonds for EUR 1,675 million (Senior Secured Notes); and extension of a multi-currency revolving credit facility (RCF) of up to USD 500 million.
The debt-refinancing optimizes Grifols’ financial structure and significantly improves all financing conditions. It also provides greater flexibility on the terms of the covenants (cov-lite).*As of December 31, 2019, the impact from IFRS 16 on the amount of debt is EUR 741 million.
Average cost of debt is 2.8%. Reduction of 80 basis points
Average maturity increases to more than 7 years
Current credit ratings are as follows