Company Reports

Narrow-moat Galderma reported strong first-half 2024 results that were largely in line with our expectations for the full year, and we're leaving our fair value estimate unchanged. Net sales grew by 10.8% on a constant currency basis, primarily driven by solid volume development and a positive portfolio mix contribution. The core EBITDA margin was 23.4%, 90 basis points ahead of the same period of last year. For full-year 2024, management now expects net sales growth at the upper end of the previously communicated 7%-10% range and confirmed the core EBITDA margin guidance of flat compared with 2023. Shares opened around 1% higher but quickly moved into the red, which we attribute to widespread market weakness and some signs of demand softening across key markets, including the US.

We are initiating coverage of Galderma with a narrow economic moat rating and a CHF 83 fair value estimate. Galderma is a pure-play dermatology company with a broad portfolio that spans injectable aesthetics, therapeutic dermatology, and dermatological skincare. The company went public in March 2024, and the stock price is up more than 40% compared with the IPO pricing level of CHF 53 per share. Given this stellar performance, we think the current share price offers a limited upside of around 9%.

Galderma is a pure-play dermatology company, with a leadership position in the self-care segment of the market, with more than 90% of total sales paid by consumers out of pocket. Its long-term revenue growth is supported by changing consumer behavior and perception around skin health and appearance. The company deploys an omnichannel go-to-market strategy, supported by a specialized, high-touch salesforce of over 1,900 employees reaching more than 110,000 healthcare professionals. This is complemented by a leading presence at dermatology congresses and an emphasis on educational, training, and loyalty programs to reinforce physician entrenchment.