BERNE Swiss drugmaker Galenica GALN.S will complete the spin-off of its Sante pharmacy unit IPO-GALS.S by July as it splits into two separate publicly listed units, it said on Tuesday.
Galenica said 2016 net profit fell 19.1 percent to 243.6 million Swiss francs ($241.5 million), hit by its acquisition of U.S.-based Relypsa last year.
Galenica is splitting into a speciality drugs business called Vifor Pharma, which has focused on iron replacements popular in its home Swiss market, and its Sante unit that runs hundreds of Amavita and Sun Store pharmacy outlets across Switzerland.
Chairman Etienne Jornod, a major shareholder, long resisted calls to carve up the company but concluded the two independent units were better: a drugs business focused on growth, in particular in the United States, and a Swiss pharmacy chain that delivers a robust dividend.
"Galenica Sante will have shareholders who are specifically attracted to its risk/return profile", Jornod told a media conference. "The two companies will have very healthy balance sheets, allowing them to develop through internal growth and acquisitions."
Its shares fell about 3 percent, in part as analysts said Vifor's investments in new medicines -- over the next three years it plans to invest 850 million francs in new products -- would continue to dent profits.
Two Swiss billionaires, Martin Ebner and Remo Stoffel, separately own 25 percent of Galenica shares, according to Reuters data. Ebner has 17 percent and Stoffel 8 percent.
IPO proceeds from floating a majority of Sante -- the remaining stake will be sold eventually, Jornod said -- will go to refinance the $1.53 billion acquisition of Relypsa.
NO CRYSTAL BALL
"We're uncertain how much of our debt we will be able to reduce, that depends on the success of the IPO and we don't have a crystal ball," Chief Financial Officer Felix Burkhard told reporters, declining to give estimates for Sante's post-IPO market capitalization.
Galenica Sante sales in 2016 rose 3.2 percent to just over 3 billion francs, with Jornod predicting a similar revenue increase this year.
By 2020, he aims to boost Vifor Pharma's stand-alone revenue to more than 2 billion francs, from 1.2 billion francs in 2016, with a goal of high three-digit-million earnings before interest, taxes, depreciation and amortization.
The maker of over-the-counter Perskindol muscle cream proposed a dividend of 20 francs a share for 2016, with Vifor Pharma's payout set to remain stable in the next three years.
Galenica Sante, which its chairman Joerg Kneubuehler described as a "dividend play," plans to distribute at least 75 to 80 francs in 2018, after which it aims to pay out more than 65 percent of net profit.
Kneubuehler said restrictions on online distribution of over-the-counter drugs in Switzerland, in contrast to Germany, would shield his store-front business model from Internet competition.
"We want to continue to grow... adding between 5 and 15 drug stores annually," said Kneubuehler, whose existing network includes around 500 locations.
(Additional reporting by Anna Serafin; Editing by Biju Dwarakanath and Michael Shields)