Advanz Pharma : Existing risks will be overcompensated by pipeline launches

The Q2 25 earnings print was quite weak and overshadowed by the continuing erosion of Ocaliva with a corresponding negative effect on net leverage. On the upside, the supply chains issues around Lanreotide and Paliperidone are coming to an end. Revenue trajectory of the two products signals improvement for H2 25 and a major recovery in 2026. However, 2025 is a transformation year for the group and net leverage will go up further over the next quarters.
We finally have started to model Advanz, factoring in the expected contributions from the near-term launches of pipeline products. Our principal criticism of Advanz’s transparency in terms of information around the pipeline portfolio remains, but we feel at least confident to model the existing portfolio and the next four product launches, albeit our assumptions on the latter are quite simple. The first two launches concern Aflibercept (biosimilar for Bayer’s Eylea) and Golimumbab (biosimilar for J&J’s Simponi).
Aflibercept: The product was approved in Europe and will launch in Q4 25. Among the four near-term launches, Aflibercept is the one with the largest addressable market but potentially subject to high competition over time as a result of launches by competitors.
Golimumab: Regulatory submission is still pending. Advanz said that the launch is further planned for Q4 25. We hope this will not result in a major delay. A quarter more or less would not matter.
Modelling the existing portfolio and the near-term launches, subject to a ramp-up phase, we derive at peak group revenue of close to GBP 900m and peak adjusted EBITDA of c. GBP 300m vs. GBP 637m and GBP 248m LTM June 2025. Net leverage will remain sticky in the next 15 months but shall improve later. In FY 25, Advanz will likely use cash, but levered FCF will become significant in the next years (FY 26 affected though by an assumed larger litigation payout).
Dividends: We continue to hope that Nordic Capital will not adopt a dividend policy as this would be a major blow to the credit story, particularly during the currently stressed times.
Litigation risk: There will likely be material cash outs – rather sooner than later (GBP 72m over the next 12-18 months). But Advanz’s good liquidity situation covers this (available liquidity of GBP 432m at end-H1 25).
Rating risk: We see basically no chance that Advanz can escape a rating downgrade by Moody’s. This would align then the ratings at B3 and B–. Caa1 or CCC+ ratings are not on our mind as long as Advanz can monetise the product pipeline.
Advanz is a controversial story, but we think chances overcompensate the risks. Anticipating the downgrade by Moody’s already, we affirm our Stable Credit Opinion. We remain also positive on the 2031 SSNs. When our model materialises, credit stats should improve over the next years and as such the current premium to other HY pharma names is attractive. We affirm our Buy recommendation on the 2031 SSNs.