Grünenthal : Qutenza growth shall offset all and everything

We affirm our Stable Credit Opinion. Grünenthal is a solid name in European HY pharma with a more conservative cap structure than other names, a good liquidity situation and the potential to generate material levered free cash flow north of EUR 200m p.a. in the next years driven by forthcoming Qutenza growth and several acquisitions closed recently (and prospectively in 2025 and 2026), which offset the structural decline within its off-patent portfolio, which will be further driven by generics competition. Qutenza is becoming more and more important for the group. While we like the growth trajectory of the product, more diversification would be positive for the credit story. The RTX discontinuation is naturally a disappointment in this context, but is not creating financial risk, just taking away financial upside. We see in the medium-term still the possibility that Grünenthal becomes Ba3 rated at Moody’s, albeit Moody’s changed the outlook from positive to stable last year. But if Grünenthal maintains financial discipline, a rating upgrade should be possible in the next few years. Investors need to watch out what a recently signed executive order by the Trump administration on pharma price containment could mean for Grünenthal (if fully implemented) – the outcome is difficult to assess.
The bonds are still Neutral for us. There are alternative HY pharma assets in the market which offer more, albeit this is coming also with a lower rating and as such a higher risk position.