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Fagron Group BV: Semi-Annual Results 2015

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Company: Fagron Group BV

Conference Title: Semi-Annual Results 2015

Presenters: Ger van Jeveren, Jan Peeters

Date: Tuesday 4th August 2015

Operator: Good day and welcome to the conference call regarding Fagron’s Semi-Annual Results

2015. Today’s conference is being recorded. At this time I would like to turn the call over to

Mr. van Jeveren and Mr. Peeters. Please go ahead.

Ger van Jeveren: Good morning. This is Ger van Jeveren, CEO Fagron, and also present is CFO Jan

Peeters. I would like to share with you the highlights of the first six months of 2015. We have

prepared a presentation that is available on our website, investors.fagron.com. Afterwards, Jan

Peeters and I are available for questions.

We once again achieved a solid result in the first six months of 2015. The EBITDA increased by

17.9% to 65.6 million, with a turnover growth of 16.6%. The organic growth, turnover growth of

25.4% at Fagron, especially Fagron Services, and of 12.7 at Fagron trademarks, was impressive.

The turnover at Fagron Essentials decreased 2.4% in the first six months of 2015. The financial

results and the developments per segment will be discussed in detail later in this call.

Regarding the first slide, fine-tuning the Fagron synergy. The past year, Fagron has transformed

itself from a company that’s only active in compounding to a leading player in the field of

specialty pharma. Besides compounding, where we have focused on for the last 25 years,

Specialty Pharma also includes admixture and ready-to-administers activities. Following this

transformation, we have fine-tuned our strategy in the second part of 2015. The starting point in

this were our unique positioning, our ambitions and huge growth potential of Fagron Specialty

Pharma Services and Fagron Trademarks. For example, the available market for Fagron Specialty

Pharma Services, especially in the US, is estimated at an $8 billion market, 85% of which is still

realised in hospitals. Increasingly, stricter legislation and regulatory requirements are almost

forcing those to outsource those sterile activities to companies like Fagron. We also see that

increased legislation and regulation result in a strong decline in the number of competitors in


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this segment. Outsourcing in hospitals, declining in the number of competitors combined with

an irreparably increasing demand for customised medication offer a huge growth potential for

Fagron. In Europe and South America, we are seeing a similar situation. Besides realising strong

organic growth, we will also focusing on acquiring still other facilities, and by building new

facilities in the US and Europe. We also see strong growth potential in Fagron trademarks. The

coming years we will make major investments to further fill our already well-filled pipeline, and

to launch these innovations to the market and to launch these innovations to the market,

accelerating the introduction to our global trade-marks in those countries and regions where

we’re not yet active.

We also initiated a project to optimise our product portfolio and production process at Fagron

Essentials. In 2015 we expect to phase out approximately €12-15 million of non-strategic, low-

margin product, with a low turnover ratio. As a result of this process, on slide 2, our strategy is

dedicated on automising and innovating customised pharmaceutical care, with the fine

objective of improving patients’ quality of life.

On slide 3, we elaborate on what is Specialty Pharma; Specialty Pharma is the design,

development, production and marketing of customised pharmaceutical products. This means

that the specialty pharma product can be customised via, for instance, an alternative dosage

form, and alternative dosage strength, or a combination therapy. The Specialty Pharma products

are produced in pharmacies or by GMP outsourcing facilities based on scientific, pharmaceutical

knowledge.

As already mentioned earlier, Specialty Pharma can be divided in three segments – traditional

compounding, admixture and ready-to-administer products. Admixture means the mixing of two

or drugs, while ready-to-administer means preparing a drug so it can be administered to the

patient. The areas of Specialty Pharma on slide 5, Specialty Pharma comprises several areas as

presented on this slide. Some of the areas such as dermatology and pain are already well-known

to all of you. Other areas give some indication of the huge potential that Specialty Pharma

offers. We are just starting to look at, for instance, veterinarian and biological markets. Fagron is

extremely well-positioned to benefit from all those new areas of specialty pharma. What are the

benefits of Specialty Pharma on slide 6; Specialty Pharma offers a lot of benefits, not only for


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patients, but also on quality and efficiency. For instance, Specialty Pharma enhances medication

compliance, and saves lives by providing lesser side effects, because it is customised to the

patient needs. Specialty Pharma offers also a solution in the situation of drug shortages.

Specialty Pharma products can also be a solution to new and unavailable therapeutic needs.

So now, on slide 7, our business model consists of Fagron Specialty Pharma Services, formerly

Fagron Compounding Services, Fagron Trademarks and Fagron Essentials. Fagron Specialty

Pharma Services are being conducted by our 22 Fagron Specialty Pharma Services centres

worldwide, and they offer nuclear, sterile and non-sterile services to more than 200,000

customers worldwide. On slide 9, with the acquisition of AnazaoHealth in April 2015, Fagron

strengthened its leading market position in the United States, and positioned itself to benefit

from the growing need of hospitals to outsource nuclear, sterile and aseptic compounding. And

a win-win-win strategy is a slide where you can see all the stakeholders in our process, coming

from patient organisations with which we have very good contacts worldwide, with pharmacies,

governments, insurance companies and laboratories.

Now I would like to hand over to Jan Peeters, who will focus on the financial slides.

Jan Peeters: Yes, good morning. Thank you, Ger. So in the first six months of 2015, Fagron achieved a

turnover growth of 16.6%, to €243.8 million. Organic turnover growth in the first semester

amounted to 8.5%. The gross margin increased again, by no less than 260 basis points to 66.2%

of turnover. This impressive result is driven by strong growth in Fagron Speciality Pharma

Services, as well as Fagron Trademarks, and of course, as well as by the optimisation of the

product portfolio of Fagron Essentials. As a result of that, EBITDA increased 17.9% to €65.6

million, or 26.9% of turnover, an increase of 30 basis points compared to the first semester of

2014. The depreciation and amortisation increased €4.5 million to 11.7 million, and this increase

is largely explained by the purchase price allocation of 2.7 million. Continuing on the next slide,

slide 13, you can see that the financial result increased by 34.5%, this due to an increase in the

net financial debt and higher exchange rate differences. On the tax side, the effective tax rate as

a percentage of profit, was 32.6%, which is mainly due to the high tax rate in the US. In the first

semester of 2015 we paid also relatively high amount of taxes, most of which were pre-

payments, so for the full year 2015, we expect a cash tax rate, so what we’re effectively going to


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pay, of approximately 20%, which is in line with our earlier guidance. So we see here mostly a

timing difference in the first semester. As a result of that, net profit grew 2.2% to 25 million.

On slide 14 we present the developments in the operating working capital, the net debt and the

capex. Operating working capital as a percentage of turnover was roughly 10%, which is in line

with what we had earlier, and net financial debt was negatively impacted by the US dollar

conversion, for a total amount of 15.8 million, and at June 30, the net financial debt on REBITDA

ratio was 3.21, which is in compliance with our covenant of maximum 3.25. At the end of 2014

we were in the same page, the net debt EBITDA was 3.18. Capex amounted to 11 million in the

first six months of 2015. Most of the capex was related to the construction of new compounding

facilities in the US and the Netherlands, and can therefore be considered as expansion capex,

and for the full year we expected capex to be maximum 25 million, as we already guided before.

So Ger will elaborate now more on the results of the different segments.

Ger van Jeveren: So looking at slide 16, Fagron Specialty Pharma services. In the first half-year of

2015 we see strong turnover growth of 16.7% to €92.2 million. EBITDA increased 59% to

€25.7 million, or 27.8% of turnover. As already mentioned earlier in this conference call, the

available market for Fagron Specialty Pharma services in the US offers huge growth potential.

It’s rapidly growing market that we estimate to be US$ 8 billion, driven by an increasing demand

for customised medication and by hospitals outsourcing their sterile compounding due to

increased legislation and regulations. In Europe and South America we see a situation similar to

the US. Fagron is very well-positioned, and has the experience and knowledge to benefit from

this changing landscape. The new state-of-the-art antibiotic facility in the Netherlands will be

fully operational in October 2015; the new GMP FDA 503B, a facility in the US, will be fully

operational in November 2015, solving the limited capacity we have at the current facility in

Kansas, which grew 94% in the first six months of 2015. In Europe, we see positive

developments in the German and Czech Republic markets to start Fagron Specialty Pharma

Services in a short time. Regarding acquisitions in this segment, I can say that we have a well-

filled pipeline of potential acquisitions; to be more specific, we are currently actively looking at

five interesting acquisition candidates, located in both Europe and the US. We already have

acquired AnazaoHealth in the first semester: on top of that we have still a war chest of €60


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million, giving the fact that after the settlement of the older earn-outs, that have taken place

this month, we increase significantly our acquisition capacity in 2016.

We elaborate a little bit more on Fagron Trademarks on slide 17; the first half-year of 2015 we

see strong organic growth of 12.7%, to €25.6 million. The EBITDA increased no more than 28.1%,

to €9.1 million, or 25.6% of turnover. Our global R&D team of 300 pharmacists and 45

researchers, at our strong and extensive R&D pipeline, our close collaboration with pharmacies

and universities worldwide forms the basis of the success of Fagron Trademarks. I am

particularly proud to see that there’s an exception on the high demand worldwide for SyrSpend.

SyrSpend, like all other Fagron trademarks, is developed in-house, based on patented active

suspension technology. The largest independently-conducted stability study showed that

SyrSpend is compatible with almost all medicines. Without a doubt, SyrSpend is the best

suspending vehicle available on the market. Two big pharma companies have already validated

SyrSpend worldwide for use in clinical trials. We have appointed a distributor for Macau for

SyrSpend, and this is only the beginning of our rapid worldwide introduction of our own

trademarks. On the next slide, slide 18, you can see Fagron’s global R&D pipeline, consisting of,

from left to right, obesity, psoriasis, transdermal application pain, Fagron Advanced Derma

phase two, and the alopecia concept.

Going further on slide 19, about Fagron Essentials, in the first half-year of 2015, we see a slight

turnover decline of 2.9% to €120.5 million. The EBITDA increased 5.8% to €29.8 million, or 24.7%

of turnover. In the second quarter of 2015, a project to optimise the product portfolio and

production process was started. This resulted in the phase-out of non-strategic, low-margin

products. In the second quarter, the impact on turnover was approximately €2 million. For the

full year, we estimate that the impact on turnover of our decision to phase out low-margin

products will be between €12 and 15 million. So the impact of this decision on turnover will be

negative, but we expect that it will have a positive impact on profitability. Sales in the second

quarter were also negatively impacted by changes in the reimbursement system in the US; the

impact on turnover in the second quarter is estimated at €4 million. We elaborate on the

reimbursement of compound medication in the US, on slide 20; we want to highlight that the

changes in reimbursement in the US are only related to non-sterile compounding. Fagron’s GMP

and FDA 503B sterile and nuclear facilities in the US are not impacted by reimbursement


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change. Non-sterile compounding in the US is and will remain reimbursed when there’s no

licenced or registered available. The compound will be prepared based on raw materials. The

compound is based on the licenced or registered product. The compound will be prepared

based on the registered products, and when a prescriber decided that compounded medications

for a patient is needed, the prior authorisation. How will Fagron benefits in the US? Fagron has

responded quickly to the changes in the US specialty pharma market, as we have done for the

past 25 years. For the non-sterile segment we see that compounding based on raw material is

decreasing, and the script price has decreased from an average $300 to a range of $200,

between $180 and $200. However, the number of scripts remains stable and we foresee a

strong growth in the number of scripts in the coming months. As patients in the US, just like in

Europe and Brazil, are willing to pay for the customised medication, we are increasingly focusing

on cash-based non-sterile compounded medication. Based on Fagron’s already very successful

concepts and trademarks in South America and Europe. Besides that, our non-sterile facilities in

the US will focus more on admixture and on compounding based on licensed products, instead

of raw materials. We will also increasingly focus on the allocation advice, on the benefits of

specialty pharma for prescribers and patients. We have for that a sales force of 500 people

worldwide, and that is increasingly growing. For the sterile segment we will focus on the strong

organic growth, and on the construction and acquisition of GMP FDA 503B Fagron outsourcing

facilities; we believe that Fagron speciality pharma service is extremely well-positioned to

benefit from the trends of hospitals to outsource sterile activities, the decreased number of

competitors due to the increased legislation and regulations and increasing demand for

customised medication. We are looking back at a strong semester in which we generated solid

financial results; our refined and optimised strategy, combined with the huge growth potential

of Specialty Pharma worldwide, make us enthusiastic and confident for the future. We confirm

our outlook for 2015, and expect to realise turnover of €500 million, and a REBITDA margin of

26%. Operator, it’s time for questions.

Operator: Thank you. Ladies and gentlemen, if you would like to ask a question at this time, please

press the star or asterisk key followed by the digit 1 on your telephone, and please ensure that

the mute function on your phone is switched off to allow your signal to reach our equipment. If

you find that your question has already been answered, you may remove yourself from the


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queue by pressing *2. Okay, it’s *1 to ask a question, and we come to our first question for

today, and it’s from James Vane-Tempest from Jefferies. Please go ahead.

James Vane-Tempest: Hi, good morning, thanks for taking my question. Perhaps if I can just start on

acquisitions? I think you mentioned in the presentation you’re looking at five candidates which

look interesting in the US and Europe. Just wondering about how we should think about the

potential to pay for those, if any of those come to fruition. My understanding at least is that the

leverage at the moment is 3.21 times, and your covenants are 3.25 times, so do you have the

potential to renegotiate that debt and increase those covenants, or should we expect some

minor equity being used, or being raised to pay for those? And then also just related to a

comment you made, in terms of the earn-outs, my understanding was that there is €100 million

in total, so there’s going to be another 60 million or so to be paid over the next couple of years

from existing deals rather than them all being complete as of the moment, so I was wondering if

you could clarify that point as well? And then I have one follow-up question on a different issue.

Thank you.

Jan Peeters: Hi James, this is Jan. In terms of financing the acquisitions we are, we look at different

alternatives, including debt renegotiation, and also a potential equity issue is, as I already

mentioned, always an option for us, if the maths work. In terms of earn-outs, we have

accelerated the earn-out payments of the acquisitions in the US because of the integration

exercises ongoing now, and that means that we issue tomorrow a number of shares, so all earn-

outs will be basically gone, because they will be paid in shares. That means that the former

management, the former shareholders and the current management of the Fagron US activity,

they become a significant shareholder in Fagron, and that means that after these operations,

earn-outs, so contingent liabilities on the balance sheet, will come down to less than 10 million,

so that means that all our earn-outs deferred payments, they will be on September 30, less than

10 million in cash, and we also have an earn-out for Anazao, but as we mentioned already

before in our press release, this earn-out, which we will eventually pay in March 2016 is also in

Fagron shares. So we use shares as a currency, and also this gives us the opportunity to have,

especially US management, heavily involved as a shareholder in Fagron.


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James Vane-Tempest: Thank you for the clarification. So just for my understanding, did you say you’re

issuing new shares, how many new shares are you issuing, and when?

Jan Peeters: It’s in the press release – we issue tomorrow 444,033 shares, so that’s 1.38%, and this is

at an average of roughly €38.50.

James Vane-Tempest: Okay, thank you. A follow-up question is, just on the US business, I think you

mentioned that there is a 4 million impact in the second quarter. Is that similar to the first

quarter? I was just wondering how that development has changed over the course of the year.

Ger van Jeveren: No, there were some PBMs, and insurance companies that adjusted their

reimbursement schedule, as we mentioned from pharmaceutical raw materials to registered

products, and that started in the beginning of May, so we the effect of that from May in June;

however, we were prepared for that, we are now focusing on the cash model as we stated in

our presentation, and we’re looking forward to a very good impact on the amount of

prescriptions that are going to be received and prescribed in the cash model.

James Vane-Tempest: Okay, so the 4 million’s from May, so really, put on our quarterly runway we

should expect a higher impact than 4, for the rest of the year. Is that the right way to think

about it?

Jan Peeters: We cannot say that, because, you know, we always see it, as a good hockey stick effect.

We are prepared to transform that into cash business, as we mentioned; we are also already

focusing in very heavy diseases like psoriasis and so on, for which there are no commercially

available alternatives, so it’s up to us and the US management to cope with that situation, which

we expected, and now we have to face that and we are going to have a good challenge on that.

James Vane-Tempest: Okay. And then my final question is, I think you mentioned the average price of

your product has gone from around 300 to around $180-200, so I was just interested how you

expect to maintain the absolute euro value of your US business in the face of that kind of pricing

environment? And do you think that flattened?


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Ger van Jeveren: James, we foresee that as we already sell also a lot of cash business in the US,

which is approximately 150 million on normal cash base, $150 per script, but what we see is that

we are sure that US patients are willing to pay, on a cash product, $180-200 per script, and we

see that also reimbursement companies are accepting that price. So we want to stabilise this

around $200, but coming from 275 and 300 indeed.

James Vane-Tempest: Okay, but you think you can make up the shortfall by volume?

Ger van Jeveren: Exactly, that’s what we said already earlier in former conference calls, that we

are counting on the volume increase.

James Vane-Tempest: Okay, so you’re thinking 30% volumes, that’s feasible? Okay.

Jan Peeters: James, what we also see is that quite some bigger pharmacies closed the doors or

stopped doing business, so we see volumes shifting from pharmacies who are basically out of

the business, or stopped that business, to us, so we keep our sales people intact, so that’s why

we are able to increase our volume just by picking up volume which is basically somewhere in

the nature now.

James Vane-Tempest: Okay. Thank you very much.

Jan Peeters: Thank you.

Operator: Our next question comes from Solange Timp from ABN AMRO.

Solange Timp: Yes, good morning gentlemen. I have three questions, if I may. My first one is about the

slow-down in Fagron’s Specialty Pharma Services; when you compare the organic growth of Q1,

that was 32.1, to the 40.8 of the half-year, that implies an organic growth of 5.7% in the second

quarter, so that came down, and can you explain a bit more, please?

Ger van Jeveren: That has of course to do with the reimbursement prices on the price-per-script

in the US, from $300 to $200.


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Solange Timp: All right, but in the press release, and previously, you are very optimistic about the

increasing demand from hospitals and also a large stake for Fagron? So I don’t know –

Ger van Jeveren: Yes, that’s – that’s the difference between sterile, which is not impacted by

reimbursement, and non-sterile, which is a little bit impacted by reimbursement issues.

Solange Timp: Okay, so what is the…

Ger van Jeveren: So in the sterile segment we are growing, heavily; in the non-sterile, we see a

slight decline based on the price-per-script in the US, which is decreased from US$300 to

US$200 per script. So we don’t see a decline in volume, but we see a decline in price per script in

the US. And we expect to transform that into growth, in the third and fourth quarter.

Solange Timp: All right, so it really is growth coming from the sterile segment, going forward now?

Ger van Jeveren: Exactly. Like we stated, only JCB was responsible for 94% growth in the first

semester, in 2015, so that’s, where we are limited by our capacity, that’s why we need building

a new company in Wichita, Kansas, to cope with that growth demand.

Solange Timp: Ah, yeah, I also had a question about that one, because, how is that going? Could you

give an update, please?

Ger van Jeveren: Well, we are finalising the construction, and we are starting to sell in November

2015, already products, and we estimate a good turnover in 2016 based on the expectation of

orders coming in already, from group purchase organisations in the US.

Solange Timp: Okay, so contracts already have been signed, that’s how I should see it?

Ger van Jeveren: Yep, yep.


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Solange Timp: Great. And then, another question was on the negative organic growth for Fagron

Essentials, and I do not see it yet in the margin. Is this now lower than a year ago?

Ger van Jeveren: Ah, yeah, in the REBITDA margin, you mean?

Solange Timp: Yeah, yes.

Ger van Jeveren: That is a little bit impacted by the US, based on raw materials decline for use in

pharmaceutical compounding. We have there an effect, a little effect, but again we see that due

to the project we started to phase out low-margin products, we foresee, that we are able to

counter that in Q3 and Q4, on a very reasonable level, so we expect there that we will maintain

or increase the margin, indeed.

Solange Timp: Then one final question, if I may. In the front page of the press release you say

something about implemented changes in June and July. That has to do with what you just

explained, then, about the different pricing of medication and a different focus, or could you say

some more about that?

Ger van Jeveren: Which phrase were you referring to, Solange, which phrase?

Solange Timp: Yeah, it was almost at the bottom of the front page of the press release. There you have

this line it says, in June and July 2015 we implemented changes in our organisation that enable

us to make –

Ger van Jeveren: Ah. Yeah, we have aligned our organisation to the strategy, meaning that we

prepared R&D, scientific teams, which are focusing less on Fagron Essentials and more on

speeding up the innovation on Fagron Trademarks and on Fagron Specialty Pharma Services,

and so there we also have allied our organisation to the future strategy.

Jan Peeters: As well as in the US we are working on integration of sales teams and we will focus on

the growth areas, such as the sterile side.


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Solange Timp: Yes, okay, that’s clear. Thank you.


Operator: From ING, we’ve got Matthias Maenhaut on the call.

Matthias Maenhaut: Yes, good morning, thanks for taking my questions. I actually had one question

on guidance in general. As already indicated it seems that the second quarter organic growth

would be negative for Fagron – could you state if the organic growth takes into account the

phasing out of lower-margin business at the Essentials segment? And then secondly, I recall

from the first quarter that you were guiding for double-digit organic growth also for this year at

constant exchange rates, and for the next three years. Is this slow-down something temporary,

or should we look for a new growth level in the coming years? That’s my first question, and then

I have two small other ones; thank you.

Ger van Jeveren: Thank you. No, the organic growth, we were a little bit impacted by the change

in the reimbursement schedule of some PBMs in May and June, so that was responsible for the

decline in organic growth; however, we are, as a pharmaceutical company, nowadays always

being confronted with reimbursement issues or regulatory issues, we should be capable to

divert that and transform that in a positive element in our company, so yeah, it will be a good

battle, but we are prepared for it, the US management is aligned, they’re shareholders now,

they are heavily involved. We are, let’s say, combining all the sales forces in the US into one

sales force, selling all Anazao, Bellevue and JCB’s products to hospitals and clinics, and we

foresee a good impact from that, and based on the growth in the second quarter, maybe you

can elaborate on that, Jan?

Jan Peeters: Yeah. I mean, you’re right, the second quarter was a little bit weak, in terms of organic

growth, so we see a decline compared to the first quarter, but again, given the market potential

in the sterile market, both in the US, Europe, given the fact that we will open our new facilities

on which we signed already quite some contracts, given the fact that we convert a lot of

reimbursed business to cash business, in a very, let’s say accelerated speed, we still believe that

this results in double-digit organic growth going forward.


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Matthias Maenhaut: All right, so you continue to guide for double-digit organic growth over the

coming years. And then maybe, on the REBITDA margin, the guidance still implies a REBITDA

margin of 26%, now for the first half you’re practically at 27%, there’s a lot of initiatives that

actually should drive margin up, if I understand correctly, so why not upgrade your REBITDA

margin guidance?

Jan Peeters: We never do. But we believe that by investing, and by investing heavily in sales forces,

new products, as you know we don’t capex in the R&D, we always need room to be able to

invest to just obtain that growth we just guided. We need money. So without eggs we cannot

cook omelettes.

Matthias Maenhaut: Okay, okay, that’s clear. I have two short follow-ups, maybe the cash-out on the

AnazaoHealth acquisition – is that already included in the cash flow statement? And then the

lock-up – is there a lock-up actually on the shares that have been paid as the earn-out for the

other acquisition?

Jan Peeters: Yes, yes there is. There is a lock-up up to 24 months.

Matthias Maenhaut: 24 months? And the cash-out of AnazaoHealth, was it already included in the

cash-flow statement?

Jan Peeters: Ah, not in the first half, no. That’s paid in July.

Matthias Maenhaut: That’s how much? Could you give an indication on that? For the amount?

Jan Peeters: That’s $30 million.

Matthias Maenhaut: $30 million. Okay, clear, thank you.

Operator: Our next question comes from Jan De Kerpel from KBC Securities.


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Jan De Kerpel: Hello, thanks for taking my question. Regarding the US situation on the reimbursement,

and the transition towards cash, can you share with us what percentage of the turnover, is

done by reimbursed compounding in the US versus cash business, and where do you see that

going, and in which time frame? And then, second question, the growth in services, so it’s clear

that there will be new facilities becoming active towards the end of the year, both in the

Netherlands and in the US, but could you give us an idea of if you want to achieve the 50%

target in 2016, how much will come from existing activities, how much will come from the new

facilities that will be opened, and how much do you still have to acquire to achieve that target?

Thanks.

Jan Peeters: So, Jan, to give an answer to your first question, it’s clear that cash business amounted

to roughly 10%, let’s say last year, of the total business, it’s growing very rapidly. We are now

currently around 30% of the business, and we believe that grows quickly to more. How quickly

that will be done is also largely dependent on the reactivity of our sales force, and on the

introduction of new products, but we estimate, for example you know that in Brazil, 100% is a

cash market, so we do have a lot of, we perform extremely well in the Brazilian market despite

the fact that the market was very, very sluggish, because we’ve really seen our benefits from

investing in our trademarks and the new concepts that we have brought on the market. On the

cash-based model it’s extremely successful, and that’s what we’re going to quickly roll out in the

US. Now, how quick that will go from 30 to whatever percentage, that’s a little bit hard to say,

but we believe that this a trend that will not stop.

Jan De Kerpel: Ah, just quickly following up on that, if you say these numbers, 10-30%, that’s of the US

situation, outside of the sterile business, correct?

Jan Peeters: Yeah, that’s just what we call our retail businesses, outside the, they are outside the

Essentials business as well. But because you see more and more compounding is now shifted

also to compound of speciality, that means that API drops a little bit, because there is also more

compounding done out of specialties. Because that’s still reimbursed.

Jan De Kerpel: Yep, okay.


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Jan Peeters: But that also is the shift in the market we see in terms of, yeah, compounding

behaviour.

Ger van Jeveren: So Jan, to elaborate a little bit more, so it’s not the case that compounding will

not be reimbursed. It will always be reimbursed when a commercial product is not available and

it is based on licensed products. Meaning you get a little bit shift from raw materials to licenced

products. And of course we are also able to do that as well, but preferably we are using

pharmaceutical materials of course, because that’s in the nature of the business, the Fagron

business.

Jan De Kerpel: Mm-hm. Okay, and then my second question, to achieve the growth target? In services?

Jan Peeters: In Fagron compounding services, can we elaborate later on that in the call because it is a

very complicated model, we have a, when you look at, for example, the guidance, let’s say that

we are growing 10% organically, we are going to do 500 million, we do 550, meaning that we

have to transfer, we’re going, have to at least achieve 275 in Fagron compounding services, and

we already have in the first half year we have 90, 92, so we have to earn another 100 million.

And I think that 50 million will come from organic growth, and 50 million from acquisition.

Jan De Kerpel: Okay, that’s clear. And if I may, a few smaller ones. You’re issuing new shares while you

still have over 300,000 treasury shares. Why are you not simply using the existing treasury

shares to pay for the earn-out? And linked to that, what is the lock-up for the new shareholders?

I believe you just said 24 months for the shareholders of the previous acquisition, but the guys

who will own one and a half percent, or a bit less than one and a half percent of the company,

what’s their lock-up?

Jan Peeters: To answer your first question we do not have enough treasury shares to fully fulfil these,

what is it, 444,000; secondly we still need treasury shares because we have some outstanding

stock options plans. The earn-out, the eventual payment of the earn-out for Anazao will be paid

in treasury shares, so we do basically use a mix of new and treasury shares.

Jan De Kerpel: Okay.


Page | 16 Ref 1609060 4 August 2015

Jan Peeters: You understand?

Jan De Kerpel: Yeah, I understand. And the lock-up of the new shareholders, of Pharmacy Services?

Jan Peeters: They all have the same schedule up to 24 months.

Jan De Kerpel: And that’s really fixed, or there’s a soft period, or there’s a gradual decline, or..?

Jan Peeters: There’s a gradual decline.

Jan De Kerpel: Mmm-hmm. Yeah.

Jan Peeters: But the first hurdle is 6, 12, 18 and 24 months.

Jan De Kerpel: Okay, good, and then the final question from me, you said a war chest of 60 million for

acquisitions, can you just simply elaborate on how you get to that calculation?

Jan Peeters: Oh, it’s pretty easy, we have guided for a war chest of 100 million in the first quarter, so

we already spent roughly 30 million, so we still have roughly 60-70 million left. Of course, it all

depends on how much shares we eventually use, on what kind of multiple we pay, etc. but

that’s roughly the number we are at. That’s the way we come to that number of 60, 70 million.

Jan De Kerpel: Okay, thanks.

Operator: From Exane BNP Paribas, we’ve got David Vagman on the line. Please go ahead, sir.

David Vagman: Hi, yes, thanks very much for taking my question. So, three questions. First, if you could

quantify the impact of the reimbursement cuts, and break it down both for the compounding

services, and then Essentials? That’s my first question.


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Jan Peeters: Yes, good morning. As we already mentioned earlier in the call, on the Essential part the

negative impact is due to the roughly 4 million impact on the Essentials part, and the Pharma

Services, on the specialty side, is especially impacted by the decline in average per-script price

from roughly 275-300 to 180-200 range, which is not yet fully compensated by volume growth.

So that’s the kind of explanation for that.

David Vagman: But that’s, I’m right to understand that that would be a 14-15% cut in price?

Jan Peeters: Yeah, if you go from 300 to 200, that’s roughly 50 on 300, that’s roughly 16%.

David Vagman: And then, to come back, and that’s my second question actually, on this cut in price,

could you explain the mechanism? Was it basically the results of a discussion, or is it just of kind

of the result of simply a broad range of factors?

Jan Peeters: Yeah, broadly it’s the result of the fact that, as we already stated earlier, several times

during conference calls and roadshows, is that we have seen a kind of abuse in the pricing of

compounded products, so we are a little bit victims of some people who abuse the system

where PBMs now, because of this, they’ve seen compounding expenses grow so fast, and

average script price going up to levels of more than a thousand dollars, they implemented some

measures to cut that down in terms of prioritisation, in terms of capping prices, in terms of

changing the rules, and that’s basically driven by some players who abuse the system. Now,

having said that, this means, as we already said, that compounding will not disappear,

compounding is still there, we still bill every day to every PBM, so it’s still there, but it’s at a

lower price.

Ger van Jeveren: But we are also sure that due to our strategy we are in a very good position to

achieve in due time, good contracts with PBMs, to supply on an exclusive manner, compounded

medication to their patients.

David Vagman: Okay, so yeah, that was kind of a follow-up. Have you yet been able to distinguish

yourself, say, from the one compounder who abused the system, basically?


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Jan Peeters: But they are blacklisted now so that means they have been kicked out of the network,

they are not able to bill any more to PBMs, so they are going out of business, some have even

closed the doors, so we are not blacklisted at all. On the contrary, we are well-positioned to,

going forward, when the dust gets down, to hopefully arrange that kind of agreements.

Ger van Jeveren: So we already stated many times that there is taking place a shake-out in the

market of, let’s say fraudulent activities from some compounding pharmacies, calculating

thousand, ten thousands of dollars for a simple script. They are now being kicked out by the

system, the positive element is that we are still in the reimbursements schedules of the PBMs,

so our products are still reimbursed, however, on a lower price, but we are able to offset that

with an increased volume.

Jan Peeters: Yeah, it’s true. To basically resume, we are very happy, because there always has been

some doubts about reimbursement; now the situation is known, now we know where we are, so

the risk is out and we can build up on that new situation, which is going to be sustainable, much

more healthy than what’s before. So we’re basically very happy with that situation because I

believe it’s clear now, and the rules are well-defined, and we can build the business on it.

David Vagman: Very clear, thanks. And my last question is about the balance sheet, basically. You have

a, you’re quite ambitious on the sterile side, you say you have acquisitions in the pipeline, so

would you contemplate to increase your equity, your capital, to accelerate your growth, given

the current level of the leverage?

Ger van Jeveren: Depending on the fact that we have a war chest of 60 million, Jan already

mentioned that due to the fact that we paid already all our earn-outs, tax payments are limited

in the second semester, we foresee that we have a huge capacity of acquisitions in the first

semester 2016, but, when there are many candidates, an equity raise is always a possibility, but

that’s always the case, but, it’s up to us to decide whether we have enough companies to, let’s

say, justify that capital increase. We always have said that we’re not going to use, and we

maintain to that policy, we’re not going to use equity issue to offset the bad balance sheet.

Jan Peeters: It’s not bad.


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Jan Peeters: But you should know that cost of debt is still a lot cheaper than cost of equity, I mean

that’s clear. Cash-flow generating at Fagron is very, very healthy, so that means that we don’t

feel uncomfortable at all with the current debt levels we have. If a company like us would be

taken private they would leverage up to 5, 6 times of EBITDA, which we’re certainly not going to

do, but given the cash flow profile of Fagron, given the growth opportunities in the sterile

market, the 8 billion market which is basically sitting there and wait for us, we are ambitious.

David Vagman: Okay, thanks. Thanks very much.

Operator: Our next question comes from Roderick Verhelst from Petercam.

Roderick Verhelst: Good morning, thank you for taking my questions. Previously in the call you

already alluded that now we’re on 30% of your prescriptions are cash-based. Can you, because I

think Jan also asked for it, can you give a bit of the growth trend that you see there, how many

people are being converted? Because I can assume that you will not be able to convert all the

patients currently using your products, I was always under the impression that cash-based

scripts were mainly for beauty products, so how do you see this for people using your products

for example, for dermatologic problems, or other long-term problems where they really have to

use for a very, very long term, so how many of those patients do you think you can switch to a

cash-based system, and how do you think the growth will be towards cash? Yeah, second is –

Ger van Jeveren: Can I first do this one? Because otherwise… What you see is, one of the best

products that we are selling in the US is, for example, our advanced derma pain concept. Pain

medication on transdermal basis, so that was always reimbursed; the very positive thing that we

see is that still these pain scripts are being bought by the patients when they are not being

reimbursed, or partly reimbursed. So, a patient is now able, very important, willing to pay cash,

partly or full amount of that medication. And we always have said that if a compounded

medication, tailor-made, is being in the range of $150-200, it will be bought by patients, and

that’s being proven, because we don’t see a decline, for example, in these pain concepts. So

that’s a very positive effect. And then, given the power of our sales force in the US, we are


Page | 20 Ref 1609060 4 August 2015

focusing heavily on that pain concept, and based on the cash-based model, we foresee a

positive trend in the coming five months.

Jan Peeters: And indeed we also introduce quite some new products out of other continents, also in

the wellness market, in the beauty market, in the obesity market, in the hormone replacement

therapy market, in the alopecia market, so we are launching a lot of new concepts, and products

in these cash markets as well in the US, so that’s something of course that we are obliged to do

given the situation. But we accelerate that, that’s why we also are aligning the organisation to

do that.

Roderick Verhelst: Okay, clear. Then on the R&D costs, because your strategic focus is to be

focusing among others on Trademarks, which I assume is going to be more R&D expensive than

for on Essentials. Can you give us as a percentage of sales, how much R&D is going to increase in

the coming quarters, or do you think it’s going to remain flat?

Jan Peeters: Well, I mean, as we mentioned before we spend roughly 25 million a year in R&D, which

is mainly consisting of stability studies, co-operations with universities, getting opinion leaders

studies, publications and all these kinds of things, so, as a percentage of sales we don’t see that

going up.

Roderick Verhelst: Okay. And then my last question, the new acquisition that you’re planning to do,

so you’re building quite some sterile facilities in Europe, and the US; how are they going to

supplement your current operations, and the facilities that you currently are building?

Ger van Jeveren: We are extremely, let’s say experienced in integrating companies that we are

acquiring, and of course that will not be jeopardizing our existing budget, but it will be an add-

on to other markets in the US, Brazil and South America. So for example, we are very good in

ophthalmology products, meaning that we are also looking into the market. There are many

markets in our Specialty Pharma Services field which we can go into, which we can grow into, so

we’re looking forward to that as well.


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Jan Peeters: If we want to unlock that value, which is now in the hospitals, we now see that

increasingly hospitals are looking for solutions. We have a lot of growth potential, and we have a

lot of possibilities to either build or acquire companies to basically respond to that market

potential.

Roderick Verhelst: Okay, clear, thank you.

Operator: Our next question comes from Anastasia Karpova from Kempen. Please go ahead,

ma’am.

Anastasia Karpova: Good morning, three questions if I may. Can you please elaborate on the

breakdown or the composition of Fagron Compounding Services, or Specialty Pharma Services?

What a percentage is driven by non-sterile compounding, and what percentage of sales comes

from sterile compounding, on a global basis and if possible per geography? And also how do you

see that proportion going forward, in let’s say six months, and twelve months? So that’s the first

question. The second one, in the –

Ger van Jeveren: Anastasia –

Anastasia Karpova: Yep?

Jan Peeters: Can we first, we don’t give further breakdowns, so now we report on these different

segments but we don’t give any further breakdowns further than that.

Anastasia Karpova: Oh, but just as an approximation, because you must provide some indication on

the cash-based business in your retail operations?

Jan Peeters: We already indicated on the retail business that cash now represents more or less 30%,

earlier in the call.

Anastasia Karpova: Yeah, but on the global scale, sterile compounding, taken specifically, and non-

sterile compounding?


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Jan Peeters: Yeah, but cash, for example in Brazil it’s all cash. In Europe it depends on the country, so

we don’t give detailed breakdowns on that because first of all it doesn’t make any sense, and

secondly it’s impossible.

Anastasia Karpova: Okay. But just, do you expect the proportion between sterile and non-sterile,

cash / non-cash to remain stable, or you expect sterile to increase? As a proportion of your

revenues?

Jan Peeters: First of all the distinction between sterile, aseptic and non-sterile is sometimes very,

very low, let’s say narrow. For example, nuclear medicine is not sterile; a lot of things are sterile

but not aseptic, aseptic and sterile, so it doesn’t really matter to make that distinction. Our

facilities are able to produce all kinds of tailor-made medication and customised medication for

hospitals, whether it’s sterile, aseptic, nuclear or whatever, it doesn’t really matter; it matters

how we fill our capacity of our facilities in order to respond to the hospitals, so we don’t give

any breakdown on that. By the way, it doesn’t matter.

Anastasia Karpova: Okay, thank you. And, my second question is –

Jan Peeters: It’s the total market growth we look at.

Anastasia Karpova: Oh, but you invest so much more, you focus so much more on sterile

compounding, so I was thinking that would be interesting to know, where it is now, where is it

going forward.

Jan Peeters: As I said, these capacities, new facilities, are able to provide products in the sterile, in

the aseptic, in the nuclear space, even in the non-sterile space, so we just want that our facilities

are state of the art, respond to highest regulations, in order to be able to serve the hospitals

with the best quality of the products.


Page | 23 Ref 1609060 4 August 2015

Anastasia Karpova: Great. And a question on your asset portfolio; if you’re acquiring a sort of retail

compounding preparation, what percentage does not currently comply with the definition of

reimbursement you’ve provided on your slide?

Jan Peeters: Can you repeat your question? I don’t understand.

Anastasia Karpova: Yep. So, you have a portfolio of products, of retail compounding products you’re

offering there, and you’ve also provided a definition of the compounds that will be reimbursed.

So out of your current portfolio in the US, how much, what percentage does not comply with

that definition?

Ger van Jeveren: That’s shifting even per PBM, so, and insurance company, so we cannot give any

guidance on that.

Jan Peeters: It’s every PBM has different rules, every PBM. Express Scripts use different rules than

Optum, than Caremark, than Catamaran, for example, so it stays, but some have other gaps,

prior authorisations, creams, so there is no, like in other pharmaceutical products, there is no

harmonisation in the way they’re reimbursed, it depends from PBM to PBM. So it’s impossible

to break that down.

Anastasia Karpova: Okay. Thank you. And, two minor financial questions. Your full-year guidance of

500 million in revenues, does it include the revenues that you gained from the acquisition of

AnazaoHealth, or includes acquisitions that went down last year?

Jan Peeters: It includes all acquisitions, yes.

Anastasia Karpova: So, also the acquisitions that will be done, let’s say, in H2 this year?

Jan Peeters: No, no, no.

Ger van Jeveren: No, no, no, of course not. By a 500 million company, tomorrow it’s not going to

include, I think.


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Anastasia Karpova: But it will include AnazaoHealth?

Ger van Jeveren: It is, yes.

Anastasia Karpova: Okay. And on your EDITDA margin expansions, can you provide the breakdown,

what proportion of that expansion is driven by positive FX rate and how much is driven by the

mix? A change in mix?

Jan Peeters: No, we don’t provide that information.

Anastasia Karpova: Okay. Thank you very much for taking my questions.


Operator: Next question from James Vane-Tempest, from Jefferies.

James Vane-Tempest: Ah, yes, hi, thanks for taking my follow-up questions. I was just wondering, the

interest expense in the first half of the year, is that the run rate we should expect for the second

half of the year? And then my second question is just on JCB – my understanding was there was

an FDA warning letter earlier this year, I was just wondering whether that had been lifted. Many

thanks.

Jan Peeters: The answer to the first question is yes, of course if we don’t do any restructuring of

debt, whatever, equity. The second is,–

Ger van Jeveren: The second question is already addressed, many times, and is already being

coped with, is already solved, the FDA didn’t publish our response letter, but that issue was

already addressed I think one year ago. So it is now already being settled and we are pushing the

FDA to get it out of their website but it is still not out of it.


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Jan Peeters: They should publish our response, but they didn’t publish it. Which is, by the way, many

companies cope with that problem.

James Vane-Tempest: Thank you.

Operator: Another follow-up question from Solange Timp.

Solange Timp: Ah, yes, here I am again. I have one final question about the antibiotics facility that will

be opened in October, the one in the Netherlands. Is that same as you discussed during the Q1

call?

Ger van Jeveren: Yeah, because we’re only building one in the Netherlands, so it will be done, and

these antibiotics will be sold, by the way, not only for the Dutch market but also for the

European market as a total. So we’re going to supply European hospital pharmacies products for

antibiotic use in their hospitals.

Solange Timp: Oh, right. But if I’m correct, it was first planned to be operational in June, right?

Ger van Jeveren: Yeah. In June it will be operational in June, but the first products will leave the

facility in October. Correct.

Solange Timp: Okay.

Ger van Jeveren: We have to do some validations, some tests, but the first products will leave the

facility in the beginning of October, indeed.

Solange Timp: Oh, okay, so now I better understand, because of that testing, it takes a little longer.

Ger van Jeveren: You also have, once you build a pharmaceutical facility, you build it, and then it

starts to be operational, and then you have to validate air pressure, microbiological testing, to

make that facility ready for production, and that normally takes eight to twelve weeks, so,

because you have to wait for the test results.


Page | 26 Ref 1609060 4 August 2015

Solange Timp: Yes, then that’s clear, thank you.

Ger van Jeveren: Thank you very much indeed, thank you.

Operator: From One Investments, we have Edward Donoghue on the line. Please go ahead, sir.

Edward Donoghue: Good morning, a few questions if I may. Just going back on to sterile, maybe

looking at it in a slightly different way, is it correct to think that the gross margin that you

actually get on the sterile products is actually greater than that on the non-sterile? Because I can

sympathise a little bit with the previous question, that there is quite a lot of emphasis in the

press release, there’s quite a lot of emphasis with regard to your capex profile, and the way you

have talked in previous meetings with regard to sterile, just to get an idea of the growth

momentum, and what that’s actually going to do to the profitability profile, especially with

regard to the US, would be most helpful.

Jan Peeters: Let’s say that gross margins on sterile, are pretty much comparable to non-sterile, and

even, I would say, non-sterile compounding out of APIs because of our vertical integration for

the group is even delivering higher gross margins, than the sterile. Depends of course also

largely on the capacity you fill, and the efficiency you produce, so in Wichita by the way that has

been published in the American press, we are one of the first utilising a high level of

automisation. Of course this enables us to increase margins, and secondly is that we see, and

that’s completely the contrary of the non-sterile side, we see an increase of prices in the sterile

market, so there we see more a pricing lift compared to the non-sterile where we see pricing

pressure.

Edward Donoghue: So if we then scroll forwards by, say, 12 months, when you’ve got more of your

US footprint up and running and the loading of that capacity has improved, how would you

visualise the margin profile of the sterile versus non-sterile, then?

Jan Peeters: Of course it will depend on the retail prices of the non-sterile, so if we stay in the range

180-200, then we have a certain margin, if that further declines, of course that will have a


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pressure on the margin. On the sterile side we will see, if the margins will further increase then

we will see an increased margin. So on the sterile side it’s a little difficult to give a guidance from

here to a year. It’s a little bit difficult.

Edward Donoghue: Okay, I know I’m pushing, but okay, I’m going to push one more time, then. If

we take the existing pricing structure as it is now, assuming that there’s no change, and then

you look at the improvements in your operational efficiencies and capacities on the sterile side,

would you anticipate a better margin profile going forward overall in ’16, versus ’15, then?

Jan Peeters: Yes.

Edward Donoghue: Okay, fine, that’s great. Then if you just look on, going back you were saying,

with regard to the scripts for pain relief in the US, as you switch from either a reimbursed to a

partial or full cash. Are you actually seeing growth continue in the scripts business, or is it

basically plateaued?

Ger van Jeveren: It’s plateaued, so we were able to maintain the same level, and that’s why we

are quite confident that due to more focus of our sales force, and on tailor-made pain

medication, we will see an increase in the pain medication on script volume, correct.

Edward Donoghue: Great. And then just on the PBMs, another point for clarification, you were

talking of the volume growth. Is this volume growth coming from existing clients, or new ones,

and if you could give an idea of potential contracts that could be signed in the second half of this

year, to give an idea of what that pipeline looks like? You said you were in a number of

negotiations – if we could get an idea of how some of those might close?

Ger van Jeveren: Yeah, so talking with PBMs is the same as doing acquisitions; you never know

what the outcome is. Of course we are able to cope with the changed landscape, but we want to

secure our business by signing these contracts and we hope to give you an update in the next six

months, and we hope, and we are already knowing that, we are in a very good position to get

those contracts, because we always have a very clean record on reimbursement pricing to these

PBMs . So we are in the spotlight of these PBMs. That is what we know. So that’s a very good


Page | 28 Ref 1609060 4 August 2015

sign. And when you look at the ability for us to grow in the pain medication field, as already

been said, due to our increased focus on that, we’re able to have more scripts on that pain

medication field.

Jan Peeters: And it’s new, it’s new customers, it’s new patients.

Ger van Jeveren: New patients.

Jan Peeters: We’re really looking for new patients.

Edward Donoghue: Right, okay. And then just, because you very helpfully gave some guidance with

regard to, was it May and June, on the PBM impact changes there. Could you give an idea of

how that sort of momentum has continued? Is it plus, minus, neutral? As we look through July

and August? Some idea?

Jan Peeters: The situation in July, August has not degradated, degrade, how do you say that?

Ger van Jeveren: Degradated.

Edward Donoghue: Degradated, yes.

Jan Peeters: Has not become worse. So we see a kind of stabilisation.

Edward Donoghue: Okay, so that, okay, that’s great. And just one last question if you don’t mind:

just on, you were talking about the sales force hiring, you have a global footprint

roughly about 500, you were indicating. Could give an idea of whether you’re still hiring, and

especially with regard to your US footprint, basically, if you could split that sales force out, and

what your hiring program is there, at the moment?

Ger van Jeveren: We have 300 in Europe, but increasing, by the way; we have 100 in Brazil, also

increasing, and in the US. Now we are in a process of combining all the three sales forces of

Bellevue, which is non-sterile specialty pharma services, Anazao nuclear sterile pharmacy


Page | 29 Ref 1609060 4 August 2015

services, and JCB, which is sterile specialty pharma services. We are combining these sales

forces, this will be concluded by the half of August, to start in September the full national sales

approach in the US, and there we expect a lot from.

Edward Donoghue: And that just, give me an idea, simplistically, how many people, then?

Ger van Jeveren: It will be 115, at least, fully focused on sales in the US.

Jan Peeters: But not increasing for the moment.

Edward Donoghue: No, no, okay, I can understand that. Just to put that in context, prior to this

integration, did you actually have significant white spots within your US sales force? Are there

geographic areas where you weren’t fully penetrated or covered to how you would like, you

actually see a significant upgrade now, with this new sales force structure?

Ger van Jeveren: East, West coast, and mid-west are very well covered…

Jan Peeters: And Florida.

Ger van Jeveren: It will be a very good national sales coverage.

Jan Peeters: It’s a good coverage.

Edward Donoghue: Excellent. Thank you very much.

Ger van Jeveren: Thank you.

Operator: And we’ve got a follow-up question from Matthias Maenhaut.

Matthias Maenhaut: Yes, thank you. Maybe two short follow-up questions. The first one, Jan, to be

clear, you already stated that there’s a US$30 million deferred payment for the AnazaoHealth


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acquisition. Are there any other cash earn-outs or deferred payments that are scheduled for the

second half of 2015?

Jan Peeters: No. I mean, we just settled now, this month, all the earn-outs of the previous acquisition

in the US, mostly done by shares, by the way, and that’s in the press release. The Anazao

earnout is in March ’16, is maximum $10 million, and will be paid eventually if we pay, in shares.

This is a hard threshold, so they have to reach a certain target of EBITDA, if they are under it

zero payment, if they are above or on it, it’s $10 million in shares. By the way, shares at €40.

Matthias Maenhaut: Okay, clear. So not taking into account any additional acquisitions, there are no

further cash payments for acquisitions, besides the 30 million?

Jan Peeters: We have, a total deferred payment amount in 2016 of €7.7 million in cash. That’s all

that is left. The first of which, 2 million is earn-out and the rest is just deferred payment.

Ger van Jeveren: So that’s why, Matthias, that’s why we said we are very well equipped in the

first semester, in 2015 as well, to do acquisitions, because normally we pay a lot of earn-outs in

the beginning of the year, and now we don’t have to do that anymore, and so we are having

room for improvement in the war chest of acquisitions.

Jan Peeters: And we are very happy that they become significant shareholders. So everybody’s on

the same page.

Matthias Maenhaut: Okay. Okay, clear. Maybe one additional question – if I look at consensus

expectations, they are substantially above your guidance. Are you still feeling comfortable with

consensus expectations for this year?

Jan Peeters: We have our guidance, and what the street is telling, okay, we are confident with our

guidance.

Matthias Maenhaut: Okay, clear. Thank you.


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Operator: As there are no further questions in the queue, I would like to turn the call back to the

speakers, for any additional or closing remarks.

Ger van Jeveren: Thank you for this conference call. We’re looking forward to meet you in

person, or to hear from you on the next conference call. Thank you all, and now we conclude

the conference call.

Operator: That will conclude today’s conference call. Thanks again for your participation, you may

now disconnect.

1609060 fagron group bv 04 08 15 24hrs(1) · conversion, for a total amount of 15.8 million, and at...

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