Equity Research, Pharmiva: Merger with Peptonic could spark the fire

On Monday, August 21, 2023, Pharmiva held an extraordinary board meeting where the proposed merger with Peptonic was approved. The merger is expected to be practically completed during the fourth quarter of 2023. The shareholders of Pharmiva will receive 12 newly issued shares of Peptonic per old Pharmiva share and will own about 15 per cent of the “New Peptonic”.

Targeting significant synergies

Pharmiva has been on a growth path, with sales continuing to increase by over 100 per cent in the first six months of 2023 to SEK 2m (0.9).  However, as Pharmiva has until now only been active in Sweden (launch in Norway in H2 2023), breakeven is still elusive. Through merging with Peptonic, Pharmiva should be able to utilize the former’s distribution agreements as well as look into further synergies using the patented Venerol drug delivery technology. We note that the merger document states that Pharmiva is expected to contribute positively to Peptonic’s earnings already in 2024. This indicates that both companies expect very significant synergies in sales as well as costs.

Carlsquare Equity Research considers the approval of the deal as a big plus for Pharmiva and Peptonic. Through the inherent synergy of the combined product offering of both the diagnostic self-test kits and the self-care treatments, organic reach should extend thanks to bundling. The combination should further strengthen both companies’ already robust presence in the domestic Swedish market and, even more importantly, ease efforts of launching more products on international markets, including the USA.

Combining all the above and the sky looks a bit brighter for both companies, with the added caveat that the combined entity must deliver on the communicated synergies and increase operational efficiency. For Pharmiva, a merger should also provide more resources for clinical development compared to the current situation. Pharmiva is importantly looking to soon complete the ongoing PIVA-01 clinical study in Sweden, which has been riddled by slow recruitment. Lastly, being part of a larger Women’s health/Femtech group should appeal to a broader investor base. If successful, the combined entity could be poised for a great comeback in the coming couple of years.

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