Ardian looks beyond Italy with Neopharmed reinvestment

Ardian’s reinvestment in Milan-based pharmaceutical firm Neopharmed Gentili will have more of an international flavour than its initial holding period – although it will still involve domestic consolidation, according to Giacomo Forti, director on the private equity firm’s buyout team.

Neopharmed is focused on primary care in the Italian market, mainly in the cardiovascular and neurology therapeutic areas.

Ardian announced in early November that it had reinvested in the firm, with NB Renaissance joining. They jointly hold a majority stake, with pharmaceutical firm Mediolanum Farmaceutici and its CEO Alessandro Del Bono – who will stay as Neopharmed CEO – retaining a portion of the shareholding.

Paris-based Ardian, an investment manager with $107 billion AUM in its private equity strategy, first invested in Neopharmed in 2018 – the first private equity investment in the firm. Ardian implemented an organic growth and buy-and-build plan that led to six M&A transactions in Italy.

The story of Ardian’s reinvestment is likely to take on an international element, however.

“The company had already started to look at international opportunities, but clearly after four years it was a kind of turning point and clearly international development may require additional equity,” said Forti. “Having a fund with already four years of holding period was not the right time to deploy additional capital. This is also why we decided to exit with the previous fund.”

International growth will likely come via M&A but the choice of target companies will depend on the opportunities available.

There are some markets where “the competition is more intense, like Germany” and “sometimes there are niches where some specific products can have a great success”, said Forti. That means any international M&A will depend “on the quality of the assets rather than a specific market”.

“There are markets more similar to the Italian dynamic, which are the southern European markets, while other European markets are more competitive and structured with auction processes,” he added. “But even in those markets you can find companies with similar business models to Neopharmed.”

During the exit, managed by Goldman Sachs and Jefferies, Ardian discussed reinvesting via a new fund “in light of the strong partnership that we have created with the CEO and also the consistent track record of the company”.

Given the size of the deal, which was not disclosed, and the interest from potential buyers, as well as the need for additional equity and the buy and build strategy for the future, Ardian decided that a partnership with another sponsor would be useful.

“NB was able to develop a good relationship with the management,” said Forti. “They had previous experience with Alphasigma, another large pharma player in Italy, and so we thought that it could be a good new journey together.”

Milan-headquartered NB Renaissance invests in international companies based in Italy. It manages more than €2.3 billion in assets.

Domestic work

Despite the international plans, there is “still a lot to be done in Italy”, said Forti. “We have still a lot of companies which are owned by entrepreneurs and families and we see a lot of value in consolidation.”

The firm is also working on a pipe of new products that has started to “materialise over the last two years and will pick up more and more”. On top of its main focus of cardiovascular and neurology, which, after a “reinforcement” over the last three years, now account for more than 50 percent of sales, Neopharmed is active in antidiabetic, musculoskeletal and respiratory therapy areas.

“We have a strong portfolio of brands,” said Forti. “Some of them have been promoted in the market to GPs and specialists for 10-15 years. There is very strong stickiness to those brands.”

During Ardian’s first investment, Neopharmed also diversified its product portfolio, helping it reach revenues of €250 million.

On top of its products, Forti points to Neopharmed’s having one of the largest salesforces in the Italian primary care business. “This is the key asset of the company that has been built over the last 40 years. The company over the past four years performed very, very well. It has almost tripled in size and, notwithstanding the covid period, has continued to overperform the market. This is clearly thanks to having one of the largest sales forces.”

Another advantage is that the company outsources the manufacturing of its drugs to third parties. “There is much more cash conversion, capex is quite negligible and therefore it’s a very good investment because on one side the company is fully focused on commercialisation and on the other side, cash conversion is giving quite good downside protection,” said Forti.

Ardian views the reinvestment as a safe play in the face of uncertainties on inflation and GDP growth. “Neopharmed represents a great investment in an anti-cyclical market in a company that we know very well,” said Forti. “The company is active particularly in chronic diseases, so our therapies last for two or three years, and therefore, there is very good stickiness of the patients to the drugs.”