There is no doubt that 2023 was an eventful year for Zur Rose AG. March marked the 30th anniversary of the company's founding. In March 1993, Walter Oberhänsli founded the medicines wholesaler together with a group of doctors. Shortly before the anniversary, a profound change took place. In February 2023, Zur Rose announced the sale of its Swiss business to the Mirgros healthcare subsidiary Medbase. This transaction is expected to generate up to CHF 360 million. By the middle of the year, almost CHF 300 million of this had already been realized. With the strengthened balance sheet, the company is focusing on its international business, particularly in Germany. The management also took account of the realignment by changing the company's name. Zur Rose became DocMorris. The Frauenfeld-based company had acquired the online pharmacy with the same name in 2012.
The small cap's stock market year was anything but boring. Starting from a record low, the Medbase/Migros transaction gave the share a strong boost. There were repeated setbacks in the meantime, but by the end of 2023 DocMorris was trading almost 190% higher compared to the previous year-end. In addition to the spin-off of the Swiss activities, the introduction of e-prescriptions (eRx) in Germany proved to be a share price driver. After a long planning and test phase, it has been mandatory for prescription drugs since January 1, 2024. Patients can obtain the required preparation in this way from both stationary and online pharmacies. Accordingly, there are high hopes that DocMorris will be one of the beneficiaries of this digitization step. The potential is enormous: the German market for prescription drugs is worth around EUR 52 billion. Sweden is a role model for the potential penetration of digital prescriptions. In the Scandinavian country, the eRx share has climbed to 13% within just a few years.
"We see the same potential for the large German market in the medium term," DocMorris explains online. The company believes it can achieve eRx sales of more than EUR 1 billion with its almost 10 million existing customers alone. To ensure that this happens as quickly as possible and that many new users also make use of the app and Internet offering, the company is beating the advertising drum. At the beginning of the week, DocMorris launched an advertising campaign on TV and social media. On Tuesday, the company published initial information on the past financial year. In 2023, DocMorris' sales shrank by 7.4% in local currencies to CHF 1.038 billion. The Group thus achieved its own target well. In the 4th quarter, sales increased by 14.3% compared to the same period of the previous year. Compared to the previous quarter, the growth rate was 11.5%. "This development confirms the turnaround towards sustainable, profitable growth," writes DocMorris in a press release. The eRx also got off to a good start. According to DocMorris, more than 60% of all prescriptions in Germany were issued electronically in the past seven days. "A further sharp increase is expected in the course of 2024," the company explains. Investors will find out how the result has developed on March 21. At operating level, CEO Walter Hess continues to forecast a loss of between CHF 30 million and CHF 40 million. In the current year, he aims to break even in terms of adjusted EBITDA, excluding eRX.
What is certain is that the coupon on the new Softcallable Barrier Reverse Convertible on DocMorris is well above the zero line. The quarterly distribution is 14.60% p.a. This yield opportunity is partially protected by the barrier of 55% of the initial level. As long as the underlying does not fall to or below this threshold in the next 15 months, investors receive the nominal back in full. Otherwise, the partial protection expires and the investment is exposed to the full risk of DocMorris. If the share turns upwards after a barrier breach and ends the term at or above the strike price, the maximum return is retained. The issuer of this BRC is Basler Kantonalbank (rating: Fitch AAA, S&P AA+). It has the right to terminate this product prematurely. In this case, investors would receive a pro rata coupon payment in addition to the full nominal value. BKB can make use of the soft callable function for the first time after six months and quarterly thereafter.
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