Grifols: calm two years after the stock market storm

BarcelonaOn January 9, 2024, almost two years ago, Grifols, the Catalan multinational specializing in blood products with family capital, suffered a huge blow on the stock market. The reason? The speculative fund Gotham City Research Gotham accused the company of manipulating its debt and operating profit (EBITDA), alleging that it inflated profits while concealing the true extent of its liabilities after years of growth. Before the pandemic, a crisis that paralyzed the blood collection business and strained its finances, the company had expanded through acquisitions, which had increased its debt. Following the initial allegations, which Gotham supplemented with subsequent reports, the group implemented governance reforms and had to divest part of its business in China, Shanghai RAAS, which it sold to the Chinese giant Haier. to reduce their liabilitiesToday, BK is in the midst of expanding its operations in Egypt, in partnership with the Egyptian government through an agreement signed in 2020, and will launch Africa's first biotechnology plant. Furthermore, it is experiencing less turbulent times and has a better outlook, according to analysts. Much of this change in the outlook is due to its results, as it earned €304 million through September, a 245% increase compared to the same period last year, after closing the third quarter with a profit of €127 million, a 146% increase. Its revenue in these nine months grew by 7.7%, to €5.542 billion.

As a result of the Gotham reports, Grifols' Class A shares—it also has Class B shares, which lack voting rights—which have been listed on the stock exchange since 2006 and have been part of the main index, the Ibex 35, since 2008, experienced declines of between 25% and more than 40%, with the decline expected to stabilize by 2025. One of the most recent crises was the attempted takeover bid between the Grifols family and the Canadian fund Brookfield, which intended to delist the company, but it ended at the end of last year. with a fragile relationship between the parties, due to a price discrepancy.

Today, despite not yet having reached the prices prior to the earthquake caused by Gotham, the group has begun to recover, with movements in less volatile markets. After falling below €7, analysts now calculate an average target price of €15.20, well above the current level of around €10 or €11. The most recent reports from Santander set a target price of €22.20; CaixaBank, €18.80; Bank of America, €17.60; and Alantra, €17.86.

The group faces the future with hopes for normalization, although the controversy with Gotham still lingers. which led to the National Court, since the speculative fund obtained Big profits betting on a downside with information that he allegedly manipulated to his advantage. The National Securities Market Commission (CNMV), for its part, sanctioned Grifols for deficiencies in information given in the market, but due to an irregularity of a much smaller dimension than what Gotham denounced.

Over many months, the company launched numerous initiatives and changes in governance, with a new CEO, Nacho Abia, who has held the position since April of last year. The Grífols family owns the majority of the shares through companies, which together account for around 30%. One of these, Scranton, the family's investment vehicle, has generated governance and financial transparency problems, which affected the market's perception of Grifols. One of the decisions It was about removing the family from day-to-day management: Raimon Grífols Roura and Víctor Grífols Deu, brother and son of the historic honorary president Víctor Grífols, ceased to be co-CEOs.

Furthermore, the group, once Anne-Catherine Berner, an independent director, joined as non-executive chairwoman, replacing Thomas Glanzmann, has recovered after four years the distribution of dividends to shareholdersAnd it has presented a medium- and long-term strategic plan with the goal of reaching €10 billion in revenue by 2029, increasing margins, and generating a considerable amount of free cash flow to make Grifols sustainable and less dependent on debt. All of this was endorsed by the shareholders' meeting.

One of the aspects highlighted by analysts is the group's vertical integration strategy. "This integration minimizes the need for imports and exports within the US market and strengthens its flexible and resilient structure in the face of potential regulatory changes or the imposition of new tariffs," explain company sources. They add that the company has been investing for thirty years in a global network of centers for the donation, processing, and distribution of plasma-derived medicines, "which allows it to operate locally in the United States, Europe, Egypt, and Canada." In the US, Canada, and Egypt, blood donors, under strict controls, can be financially compensated, unlike in Spain and other European countries that must import blood-derived medications.

This strategy allows the company, for example, to avoid US tariffs, where it collects and processes blood and operates locally. In this sense, it is a self-sufficient market, meaning it supplies its own blood-derived medications, as does its subsidiary in Canada. And now, through the Grifols Egypt for Plasma Derivatives (GEPD) project, an alliance created with the Egyptian government, it is also operating in Egypt. The group's board member, Tomàs Dagà, serves as vice president of this project. This lawyer, who was also legal counsel for many of the company's operations, is closely related to the owning family, has been a board member since 2000, and was challenged by the shareholder funds Mason Capital, Sachem Head, and Flat Footed, who, once they placed a representative on the board of directors, They have abandoned the criticism

The project in Egypt involves deploying the country's, Africa's, and the Middle East's first comprehensive plasma ecosystem, achieving self-sufficiency in three essential plasma-derived medications: immunoglobulins, albumins, and clotting factors. This marks another step in the company's leadership in the global plasma industry. Egypt becomes the sixth country worldwide to achieve plasma self-sufficiency.

This milestone comes five years after Grifols and the Egyptian government signed an alliance in 2020 to deploy the country's, Africa's, and the Middle East's first comprehensive plasma ecosystem, with a joint investment of €280 million. Grifols holds 49% of the project, and the Egyptian government holds 51%. Until the plant in Egypt is operational, the company will transport the blood collected in Egypt to its Parets del Vallès factory, from where it will then be returned to Egypt. Once the factory is operational, the entire process will take place in Egypt. Grifols estimates that the first phase of the plasma processing plant in Egypt will be operational in 2026.

This is the first time Egypt has achieved self-sufficiency in its supply of medicines derived from domestic plasma, after decades in which the country relied almost entirely on imported plasma, primarily from the United States. This represented a structural vulnerability in the health sector that the Egyptian government had identified as a national strategic priority.

Currently, Grifols has sixteen donation centers in Egypt, with four more to be added during 2026, an analytical laboratory, and a comprehensive plasma logistics center that guarantees traceability and maximum control throughout the entire value chain, as has been the case in all Grifols operations since 2019. GE is projected to contribute €55 million to Egypt's GDP in 2025 alone, and estimates that it will contribute more than €272 million annually to the country's GDP by 2030. This estimate is the result of the direct impact generated by GEPD's own operations through its entire network of donation and logistics centers. The indirect impact linked to the activity of local suppliers and services that support the project, and the induced impact, resulting from the consumption expenditure of households whose income comes from these direct and indirect jobs.

During the growth plan between 2026 and 2029, GEPD will receive direct investments worth approximately €209 million. Overall, the total economic impact on the country's GDP during this period is projected to exceed €700 million, including direct, indirect, and induced impacts. To date, the project has created 1,200 high-quality, highly skilled direct jobs, approximately 10,150 indirect jobs, and 4,200 induced jobs in the country. During the 2026-2029 growth plan, the country is expected to generate 186,000 new jobs, of which 44,700 will be direct, 107,800 indirect, and 34,280 induced.