By Chantal Marx
Galderma is a Swiss-based company solely dedicated to skincare. The company's focus areas are injectable aesthetics, dermatological skincare and therapeutic dermatology. Galderma was founded as a joint venture between L'Oréal and Nestlé in 1981 and acquired by EQT Private Equity, a consortium of private institutional investors, from Nestlé in 2019 who then had sole ownership of the company. Galderma listed via an IPO in 2024.
The EQT consortium remains the largest investor in Galderma stock, currently holding 50.2% of outstanding stock. L'Oréal purchased a 10% stake in the company in August 2024 directly from the consortium led by EQT.
Injectable Aesthetics is Galderma's largest segment, accounting for 52% of sales in FY24. Within the segment, Neuromodulators accounted for 58% of sales and Fillers & Biostimulators made up 42% of sales.
The United States (US) is Galderma's biggest market and accounted for 40.8% of sales in FY24. With flat revenue growth in that market in the year, this was down from 44.0% in FY23.
The Injectable Aesthetics market is growing
Over the last decade the Injectable Aesthetics market has grown by more than 10% per year. Per McKinsey, the primary drivers have been improved access to services (including via aesthetics clinic chains, med spas, and beauty bars), growing consumer spending power, and changing consumer attitudes about wellness, beauty, and healthy aging. The expectation is that this growth rate will persist - particularly as younger age cohorts (younger millennials and gen Z's) become more aware of the long-term benefits of early aging interventions; acceptance builds among older consumers and men; and emerging market growth persists. The pool of potential patients is still significant - global market penetration for Injectables Aesthetic is still in the single digits.
Neuromodulators
Neuromodulators are wrinkle-relaxing injections of botulinum toxin that are used to treat wrinkles, frown lines and crow's feet. A small amount of the neuromodulator is injected directly into the underlying muscle, causing it to relax and gradually smooth out the appearance of the overlying skin. Neuromodulators can also be used to treat other conditions like excessive sweating, chronic migraines, muscle spasticity, and certain eye disorders. The effects typically last about three months.
Botox (owned by AbbVie) is the best-known neuromodulator currently on the market and holds the highest market share, followed by Galderma's Dysport. Galderma is currently rolling out its new neuromodulator, Relfydess, the first and only "ready-to-use" liquid neuromodulator that has also been showed to deliver results earlier and with improvement being maintained for longer (six months versus three months for Botox and Dysport).
Fillers and Biostimulators
Dermal fillers and biostimulators are both cosmetic injectables, but they work differently. Dermal fillers provide immediate volume and fill in wrinkles, while biostimulators stimulate the body's natural collagen production for gradual, long-lasting rejuvenation. While most of the demand for these products comes from aesthetic demand, they are also increasingly used in areas such as orthopaedics and sports medicine - particularly biostimulators.
The opportunity in skincare is still substantial with the dermatology market set to grow at a compound annual growth rate (CAGR) of close to 10% per annum over the next ten years.
AbbVie is also a major player in the biostimulators injections market, known for its popular brand Juvéderm. Galderma has two main brands within this segment namely Restylane and Sculptra. Restylane offers a range of hyaluronic acid-based products consisting of two product groups: Restylane fillers and Restylane Skinboosters. Scluptra is a well-known biostimulator.
The opportunity in dermatological skincare is still significant
The opportunity in skincare is still substantial with the dermatology market set to grow at a compound annual growth rate (CAGR) of close to 10% per annum over the next ten years.
Within this space, Galderma owns the 75-year-old highly trusted Cetaphil brand (mainly used for sensitive skin) as well as one of the fastest-growing physician-dispensed skincare brands Alastin (specialising in pre- and post-procedure products and restorative skincare).
Nemluvio - a game changer in derma therapy
Galderma boasts the leading market position in treatments for acne, rosacea and actinic keratosis. These include brands such as Soolantra, Differin and Benzac.
In eczema, Nemluvio is the number one IL-31 receptor alpha (RA) inhibitor globally. In December 2024 Galderma received FDA approval for the use of Nemluvio to treat moderate to severe atopic dermatitis (eczema) - an issue that more than 230 million people globally and ~7% of US residents struggle with. Nemluvio is the first approved monoclonal antibody that specifically targets IL-31 RA, inhibiting the signalling of IL-31. IL-31 drives itch and is involved in inflammation and epidermal dysregulation in eczema. Itch is often reported as being the most problematic symptom for eczema patients as it reinforces the cycle of the disease. The product can also be used to treat prurigo nodularis (severely itchy skin) and was approved in the US for this purpose in August 2024. The company received approval for the product in the treatment of both conditions in the European Union (EU) in February this year.
Market authorisation is still outstanding in several other key jurisdictions.
Financials
Over the past couple of years, revenue growth has been driven by the dermatological skincare business (low-teens growth) and to a lesser extent injectable aesthetics (mid-to-high single digits). While growth in these areas is expected to remain healthy, it is anticipated that therapeutic dermatology will provide the next leg up in growth for the business, driven by Nemluvio.
Galderma's gross margin hovers around the 70% level and is expected to expand to just under 74% through 2028. The EBITDA margin is currently just above 20% and is anticipated to expand strongly over the next few years to just under 30% in FY28.
Galderma's largest expense is selling and marketing expenses (57% of total), followed by general and administrative costs (23%) and research and development (R&D, 11%). As a percentage of revenue, selling and marketing expenses were at 31% in FY24 and R&D was 5.9%.
Galderma currently holds debt of $2.3 billion at the end of FY24, translating to a net-debt to EBITDA of 2.5 times and debt to equity of 30%. Galderma has made several acquisitions to expand its portfolio and market position which involved debt financing. The carve out from private equity also involved significant debt. However, debt is anticipated to be paid down quickly over the next few years and the company is anticipated to be in a net cash position by FY28. This will be aided by robust profitability and strong cash generation.
Investment case summary
Risks
Consensus considerations
Consensus is positive on the stock with 67% of sell-side analysts holding BUY recommendations, 27% with HOLD recommendations and 6% suggesting investors SELL the stock.
Recent price action has been very positive and the company is currently trading at 9% above the consensus 12-month target price of CHF117. The target price range is large, however. The most bullish target price is CHF137 and the most bearish is CHF86.
Following a recent rerating, on a forward PE of 46.5 times, Galderma trades at a substantial premium to peers, as well as its own rating since listing last year. This rating is expected to unwind quite quickly, however, to 33.9 times over 24 months and 26 times in 36 months' time. Still, the stock looks expensive at current levels.
We like the company, however, and will reconsider the investment proposition should the share fall back to ~CHF110 (current price: CHF128).
