“Products & Care” segment
The “Products & Care” segment comprises the “Retail” business area with offerings for patients and end customers (B2C) and the “Professionals” business area with offerings for business customers and partners in the healthcare industry (B2B).
The “Retail” business area comprises the two sectors “Local Pharmacies” (POS) and “Pharmacies at Home” (mail-order and home care), while the “Professionals” business area consists of the “Products & Brands” and “Services for Professionals” sectors. Both business areas focus on the development, marketing and sale of healthcare services and products through the various Galenica distribution channels. For end customers (B2C), the company’s own bricks-and-mortar pharmacies, home care services, mail-order pharmacies and online shops offer solutions for health and well-being, depending on their needs. Galenica also supports healthcare providers (B2B) such as pharmacies, drugstores, physicians, care homes, hospitals and home care organisations as a strong partner.
“Products & Care” segment development
Net sales development
The “Products & Care” segment generated net sales of CHF 829.3 million (+3.1%) in the first half of 2024. Of this, CHF 695.4 million (+2.4%, excluding Coop Vitality and Mediservice) was attributable to the “Retail” (B2C) business area and CHF 138.4 million (+7.6%) to the “Professionals” (B2B) business area.
Adjusted1 EBIT increased by 3.9% to CHF 75.9 million, and the EBIT margin increased from 9.1% to 9.2%. The main driver of the positive EBIT development was an increase in the gross margin in the “Products & Care” segment due to the strong growth in “Products & Brands” and the higher share of low-priced medications in the “Retail” business area. On the other hand, higher expenses in connection with the further expansion of the IT infrastructure to implement the “Omni-Channel” strategy had a dampening effect on EBIT growth.
“Retail” business area (B2C)
Net sales development
In the first half of 2024, the “Retail” business area generated net sales of CHF 695.4 million (+2.4%, excluding Coop Vitality and Mediservice). Of this, CHF 657.6 million (+2.7%) was attributable to “Local Pharmacies” (POS) and CHF 37.9 million (-2.9%) to “Pharmacies at Home” (mail-order and home care).
“Local Pharmacies” sector
In the first half of 2024, the “Local Pharmacies” sector generated net sales of CHF 657.6 million (+2.7%, excluding Coop Vitality). The expansion of the pharmacy network accounted for 1.2% of the sales growth.
Government-ordered price reductions led to a 1.7% decline in sales in the reporting period. Excluding this effect, net sales in the “Local Pharmacies” sector would have risen by 4.4%.
By way of comparison: drug sales from bricks-and-mortar pharmacies in Switzerland (prescription [Rx] and OTC products) grew by 1.5% in the reporting period (IQVIA, Pharmaceutical Market Switzerland, first half of 2024). The consumer healthcare market declined by 0.2% year on year, with the non-medications segment declining by 2.2% (IQVIA, Consumer Health Market Switzerland, first half of 2024). The pharmacies of the Galenica Group were thus able to grow faster than the market and gain market share.
Pharmacies are an increasingly popular choice as the first point of contact
Basic care provided by pharmacies is a key pillar of the Swiss healthcare system. Galenica successfully tested the “Consultation plus” concept last year with a view to improving the customer experience in pharmacies and further establishing the pharmacy as the first point of contact for health issues. The concept itself was developed in collaboration with customers. “Consultation plus” is not a new service, but a holistic approach to developing and positioning healthcare services in Galenica pharmacies. The figures show that there is strong demand among customers for both advisory and healthcare services. In the first half of 2024, 93,000 paid advisory and service consultations were conducted in Galenica pharmacies, 32% more than in the previous year. The focus is on consultations for common health issues such as urinary tract infections, skin problems, conjunctivitis and erectile dysfunction.
Medical expertise in pharmacies
The high level of acceptance of pharmacy services among customers is reflected in their general willingness to pay for them. Despite this, Galenica is committed to putting systems in place so that services can be paid for under basic and supplementary insurance models offered by health insurers. This has a positive impact on the industry as a whole. In the first half of 2024, for example, AXA and Galenica concluded an agreement under which AXA supplementary insurance covers the costs of in-pharmacy advisory services. In its communication, AXA has explicitly referred to the medical expertise of pharmacy staff – a gratifying confirmation for Galenica, which places great importance on the continuous training and development of employees, particularly as part of the “Consultation plus” concept, which in turn makes pharmacy careers more attractive.
Further expansion of vaccination services in pharmacies
Demand for pharmacy-format vaccination services (excluding COVID-19 vaccinations) that can be booked online also saw significant growth of around 30%. Depending on cantonal regulations, the population can get vaccinated against infectious diseases such as flu, shingles, Pertussis (whooping cough) or pneumococcus at Amavita, Sun Store or Coop Vitality. Galenica welcomes the fact that more and more cantons are laying the groundwork for a comprehensive range of vaccinations in pharmacies. This positive development is due not least to a constructive dialogue between the private sector, relevant associations and the public sector.
Telemedicine as a resource-saving additional service
With the “Book a Doc” service, Galenica pharmacies have a valuable additional tool at their disposal to treat even more complex cases directly by consulting a doctor digitally direct from the pharmacy. Following a successful pilot project, 250 of the some 370 Galenica pharmacies are now in the test phase of a system that allows them to promptly organise a telemedical consultation for customers who need one. Thanks to the interdisciplinary collaboration with Medgate, which developed “Book a Doc”, health problems such as shingles can be treated in a cost- and resource-efficient manner that is easy and convenient for patients.
Further expansion of the pharmacy network
Galenica pursues a strategy of continuously optimising its pharmacy network through acquisitions or opening new premises. It acquired nine pharmacies in the period under review and opened one new location. This allowed the Group to strengthen its presence in the Bernese Oberland and Ticino regions in particular. Furthermore, five pharmacies were closed resp. merged with other locations. Galenica will continue to invest in its pharmacy network in the second half of 2024, drive expansion and complete renovation work in existing pharmacies. As of 30 June 2024, Galenica’s pharmacy network comprised 374 locations.
Our pharmacy network
|
|
30.06.2024 |
31.12.2023 |
Change |
|
Amavita pharmacies 1) |
196 |
188 |
+8 |
|
Sun Store pharmacies 1) |
85 |
85 |
– |
|
Coop Vitality pharmacies 2) |
86 |
89 |
-3 |
|
Specialty pharmacy Mediservice 2) |
1 |
1 |
– |
|
Majority holdings in other pharmacies 1) |
6 |
6 |
– |
|
Total own points of sale |
374 |
369 |
+5 |
1) Fully consolidated
2) Consolidated at equity
Revision of Art. 38 of the Health Insurance Benefits Ordinance (HIBO): distribution share adjustment
The price of a drug consists of several components. On top of the ex-factory price, which is the amount the manufacturer receives for its product, the distribution share and VAT are added. The distribution share pays for the services that are provided until a medication can be dispensed at the pharmacy. This includes transport to the pharmacy, pharmaceutical staff as well as storage and rental costs. The distribution share consists of a price-dependent surcharge (variable component) and a pack surcharge (fixed component). Because the variable component has been higher for more expensive drugs, there has been no incentive to prescribe and dispense cheap generics or biosimilars. The Federal Office of Public Health (FOPH) tackled this problem. Together with the associations of service providers, the FOPH worked out an adjustment to the distribution share of prescription drugs, which came into effect on 1 July 2024. Galenica welcomes the new regulation and is confident that it will achieve the desired effect cost-reducing effect.
Promoting dispensation of generics and biosimilars
Dispensing generics and biosimilars that are cheaper than the original product is an important measure in curbing the rise in healthcare costs. With the amendment of Art. 38a of the Health Insurance Benefits Ordinance (HIBO), the Federal Council has taken an important step in this regard: substitution with biosimilars is now permitted. If the substitution of an original preparation that is at least 10% more expensive for a generic or a biosimilar is not justified on verifiable medical grounds, the deductible will also be increased from 20% to 40%. Likewise, only 25% of the costs of the original medication will be deducted from the annual deductible of CHF 700. The deductible for generics and biosimilars remains at 10%.
“Pharmacies at Home” sector
The “Pharmacies at Home” sector achieved net sales of CHF 37.9 million (excluding Mediservice) and declined slightly by -2.9%. This development was due to declines in sales at mail-order pharmacies, which performed in line with the market, as well as a streamlining of the offerings at Bichsel Homecare and the Amavita and Sunstore online shops. In contrast, the online-driven click-and-collect sales reported in the “Local Pharmacies” segment developed extremely positively in the first half of the year, with growth of 23%.
Greater presence and more networking
In operational terms, “Pharmacies at Home” focused on several events: the finalisation of the joint venture between Redcare Pharmacy and the specialty pharmacy Mediservice, allowing Switzerland’s leading online pharmacy to focus on further expanding its range and looking after its brands in the first half of 2024. Galenica strengthened its presence in southern Switzerland with an investment of 33% in Farmadomo Home Care Provider SA, the leading home care organisation in the field of clinical nutrition and blister packaging of medicines in the canton of Ticino. Last but not least, the sector intensified its collaboration with home care organisations for the indications of Parkinson’s disease and palliative care. Among other things, Galenica’s home care specialists entered into a partnership with palliative.ch, the Swiss Society for Palliative Medicine, a relationship that is based on networking and knowledge sharing.
“Professionals” business area (B2B)
Net sales development
In the first half of 2024, the “Professionals” business area generated net sales of CHF 138.4 million (+7.6%). Of this, CHF 97.0 million (+7.8%) was attributable to “Products & Brands” and CHF 41.4 million (+7.3%) to “Services for Professionals”.
“Products & Brands” sector
The “Products & Brands” sector generated net sales of CHF 97.0 million (+7.8%) in the first half of 2024. Of this, CHF 72.9 million (+2.5%) came from the Swiss market and CHF 24.1 million (+28.0%) from exports involving distribution partners. Organic growth in the “Products & Brands” sector, excluding the expansion effect (+1.3%) due to the acquisition of Padma in 2023, amounted to a pleasing 6.5%.
The export business of Verfora developed very positively with growth of 28.0%. This pleasing result was driven by higher demand for Verfora products, such as Perskindol® in Asia, as well as earlier product deliveries abroad compared to the previous year. Due to a reduction in inventories in the market, the Swiss business of Verfora showed only slightly positive organic growth of +1.5%. By contrast, sales of Verfora products in the pharmacy and drugstore market outperformed the market as a whole with growth of 4.5% (IQVIA, Consumer Health Market Switzerland, YTD June 2024), enabling the company to gain further market share.
By way of comparison, the consumer healthcare market declined by 0.2% compared to the same period of the previous year (IQVIA, Consumer Health Market Switzerland, first half of 2024).
“Services for Professionals”
The “Services for Professionals” sector achieved strong growth of +7.3% with sales of CHF 41.4 million in the first half of 2024. Growth drivers were in particular Medifilm and Lifestage Solutions in the business with care homes and home care organisations.
Growing demand from institutions
Patient-specific blister packaging from Medifilm is in high demand, partly due to the shortage of skilled workers in institutions such as nursing homes. Medifilm has responded to this development by investing in new, modern and fully integrated blister packaging machines in order to be able to provide further urgently needed capacities. As medication safety is a top priority, commissioning is taking place gradually and under strict quality precautions. Lifestage Solutions is also continuing to grow. Lifestage Solutions moved into a new warehouse in the first half of 2024 to meet the increasing demand for its products and services and to be able to grow further in the future.
Gateway to the Galenica network
Galenica offers a unique range of services for nursing homes and home care organisations throughout Switzerland. In addition to clinical nutrition from Bichsel, the range also includes patient-specific blister packaging of medications by Medifilm, the mobile home doctors from Emeda and the digital platform from Lifestage Solutions for the fully automated ordering and invoicing of medical consumables and care products. It is precisely this line of business that will play a central role in the network in the future. Galenica plans to bundle all its services for professional service providers together on the Lifestage Solutions digital platform, thereby not only enabling welcome efficiency gains for healthcare professionals, but also optimising and consolidating the entire network offering.