11 JAN COSMOS HEALTH: NOURISHING THE NUTRACEUTICALS SECTOR
Cosmos Health Inc., (NASDAQ: COSM), is an international pharmaceutical company with a proprietary line of nutraceuticals and distributor of branded and generic pharmaceuticals, nutraceuticals, over-the-counter (OTC) medications and medical devices through an extensive, established EU and UK distribution network. The Company identifies, acquires, develops and commercializes products that improve patients’ lives and outcomes.
Cosmos Health has offices and distribution centers through its three wholly-owned subsidiaries: (i) Cosmos Health Inc., the parent company headquartered in Chicago, USA (ii) SkyPharm S.A., headquartered in Thessaloniki, Greece; (iii) Decahedron Ltd., head-quartered in Harlow, United Kingdom; and (iv) Cosmofarm S.A., headquartered in Athens, Greece.
Market Cap: $49.14M; Current Share Price: $4.64
Data by YCharts
Below, we discuss some of the reasons why the Company looks so promising.
Well Diversified business Model
The Company not only develops and distributes their own proprietary line of nutraceuticals but also a broad line of branded generics and OTC pharmaceuticals. This provides significant diversification, along with strong opportunities for growth.
Image Source: Company
Pharmaceuticals and Healthcare Distribution Business
The Global Pharmaceuticals market is expected to grow from $1,455bn in 2021 to $1,587 in 2022 at a CAGR of 9%. The market is expected to reach $2,135bn in 2026 at a CAGR of 8%.
The proportion of the population aged 60 and up will rise from 1 billion in 2020 to 2.2 billion by 2050. This rise in the aging population is expected to increase the patient pool of many chronic diseases such as rheumatoid arthritis, hypertension, diabetes and cancer, and the increase in the patient pool will drive the demand for pharmaceuticals used in the treatment of these diseases.
Cosmos Health may thus significantly profit from its cross-border pharmaceutical business that serves wholesale pharmaceutical distributors and independent retail pharmacies across the EU. It operates through a network of two strategic distribution centers – one in Greece and one in the UK, along with an additional warehousing facility. Moreover, it employs an effective strategy where it leverages its growing purchasing scale and supplier relationships to secure discounts and provide pharmaceuticals at reduced prices so that it can continue to drive organic growth at attractive margins for its cross-border pharmaceutical wholesale business.
Additionally, the Global Healthcare Distribution Market was valued at $808bn in 2020 and is expected to grow at a CAGR of 7% by 2028 reaching $1,385bn. Increasing prevalence of chronic diseases among the growing population is one of the key drivers for market growth.
Cosmos Health is poised to benefit from this phenomenon as well, as it has developed a robust global distribution platform which is currently expanding throughout Europe, Asia and North America. In fact, the Company serves approximately 1,500 independent retail pharmacies and 40 pharmaceutical wholesalers in the Greece region by providing brand-name and generic pharmaceuticals, over-the-counter medicines, vitamins and nutraceuticals.
What is noteworthy is that the Company invests in technology to enhance safety, distribution and warehousing efficiency and reliability to better serve their clients. Specifically, the Company operates a fully automated warehouse system with three robotic systems, two ROWA™ types and one A-frame type, that ensure 0% error selection rate, accelerate order fulfillment, and yield higher cost-efficiency in the distribution center. The automated and GDP licensed distribution capabilities in EU and UK ensure all medications reach their destinations daily on an efficient and secure way. Thus, the Company is well on its way to achieve the aim of delivering pharmaceutical products more safely, minimizing at the same time warehouse operational costs and human error.
Proprietory Product Offerings
The Company regularly evaluates and undertakes strategic initiatives to improve its profit margins, and strengthen its competitive position.
The Global Nutraceuticals Market was valued at $455bn in 2021 and is expected to reach $988bn by 2030, denoting a CAGR of 9.0% (2021-2030). The growing demand for dietary supplements and functional food is expected to be a key driving factor for the market over the forecast period. So far, consumers’ attitude is observed to be very positive towards nutraceuticals mainly on account of the added health and wellness benefits offered by them. Moreover, the Covid-19 pandemic across the globe has paved the way for nutraceuticals to build a strong presence in the global market.
Taking into consideration the growing demand of various vitamins and nutraceuticals, the Company entered the market with its own brand of nutraceuticals: Sky Premium Life® (SPL) and “Mediterranation”. The Company’s portfolio currently includes 75 product codes including vitamins, minerals and other herbal extracts used for health prevention and care needs. Some of its popular brands and products are shown below.
Image Source: Company
Cosmos Health makes use of analytics and customer feedback from their EU-wide network of wholesale pharmaceutical distributors and independent retail pharmacies to identify and evaluate which nutraceutical product codes of the brand Sky Premium Life® to be developed, commercialized and added to their portfolio. The Company intends to continue to bring Sky Premium Life® products to market primarily through their existing network of over 160 pharmaceutical wholesale clients and vendors and approximately 100 independent retail pharmacies within the EU market.
Cosmos Health is also a pioneer in the field of nutraceuticals as is evident from its new proprietary line “Mediterranation”, which ensures that Mediterranean & Greek herbs are accessible to everyone around the world.
Other notable products include Melatonin – prepared with Nanoemulsification Technology, achieving 240% greater and 630% faster absorption compared to the tablets, within the first 5 minutes after sublingual administration; and Otikon – the only completely herbal preparation for the treatment of symptoms otitis media and otitis externa.
There is growing demand for vitamins and nutraceuticals and the Company is committed to developing quality products and creating enhanced customer value. This is evident from the fact that the Company’s products are made with the highest quality raw materials, manufacturing is performed to strict pharmaceutical standards and good manufacturing processes (GMP) protocols and effects are evaluated via clinical trials. Thus, the Company’s conscientious approach towards nutraceuticals is expected to serve as a catalyst for accelerated growth and enhanced gross profit margins.
Effective Acquisition Model, Strategic Partnerships and R&D Initiatives
The Company regularly evaluates acquisition targets that would allow them to expand their distribution reach and/or vertically integrate into the supply chain of pharmaceutical products that they currently distribute.
In February 2017, the Company acquired Decahedron Ltd., a UK Company which is a fully licensed wholesaler of pharmaceutical products, and its primary activity is the distribution, import and export of pharmaceuticals. In December 2018, the Company completed the purchase of all of the capital stock of Cosmofarm Ltd., a pharmaceutical wholesaler based in Athens, Greece.
More recently, over FY 2022, the Company
· Announced an exclusive agreement to market and distribute Nickelodeon’s SpongeBob and PAW Patrol kids’ vitamins in Greece and Cyprus, aiming to reach out 11,000 pharmacies and 120 wholesalers in Greece and 780 pharmacies in Cyprus.
· Executed a letter of intent for a strategic co-venture agreement with Smart for Life (SMLF) to cross market products and services in their reciprocal markets. It is considered to be a large mutually beneficial opportunity for both companies with the primary distinction being the respective markets, with Cosmos serving the EU and UK markets and Smart for Life serving the North American markets.
· Entered into a letter of intent agreement to wholly acquire ZipDoctor Inc., a direct-to-consumer subscription-based telemedicine platform, that expects to provide its customers affordable, unlimited, 24/7 access to board certified physicians and licensed mental and behavioral health counselors and therapists.
· Entered into an agreement with Virax Biolabs (VRAX), to become the distributor of Monkeypox Virus Real-Time PCR Detection Kits, having the exclusive distribution rights for Greece and Cyprus, with the opportunity to distribute the test kits across Europe on a non-exclusive basis.
· Entered into an exclusive agreement with Mediprovita GbR. Mediprovita started selling its Sky Premium Life SPL products in Germany and Austria beginning in the Q4 FY22. The initial orders were sold through Amazon, eBay, and Mediprovita’s own ecommerce website. The Company expects to extend its relationship with Mediprovita in the near future to include the distribution of 70 SKU’s.
· Entered into a binding letter of intent to acquire Pharmaceutical Laboratories CANA S.A., a Greek pharmaceutical company that manufactures, sells, distributes, and markets original branded products researched and developed by leading global pharmaceutical and healthcare companies.
· Entered into an agreement to acquire LIFE NLB, Ltd. ‘s product portfolio, including Bone-Vio® and Bone-X, related to bone health targeting the human gastrointestinal microbiome.
· Deserving special mention is the Company’s partnership with Cloudpharm P.C., a bio-pharmaceutical R&D company focused on the discovery of bioactive compounds with an emphasis on natural products, with the aim of developing new medicines, cosmetics and nutraceuticals. Announced in June 2022, the aim of this collaboration is a research services proposal. Specifically, Cloudpharm will support the implementation of specific R&D objectives for Cosmos Health Inc. towards the development of new products as following:
· Design novel nutraceuticals, targeting inflammation through microbiome for respiratory / cardiovascular / central nervous system – post-Covid syndrome
· Develop weight management product ‘Lightia’ – Medical device class II
· Pre and postbiotics through biotech process
· Run clinical trials to support “health claim”
Image Source: Company
The global human microbiome market is expected to reach USD 1,370 million by 2029 from USD 269 million in 2023, growing at a CAGR of 31.1% during the forecast period (2023-2029). Cosmos Health’ decision to partner with Cloudpharm indicates that it is cognizant of the opportunities offered by this sector and is keen on benefitting from the same.
Consistent Revenue Growth
Cosmos Health has achieved exponential growth in revenues and profit margins over the last several years as is evident from the graph shown below.
Image Source: Company
More specifically, in FY20, revenue increased 40% to $55.4 Million, versus $39.7 for the same period last year. At the same time, gross profit for FY20 increase 120% to $8.1 million, versus $3.7 million for FY19.
From these details, it is evident that the Company had the ability to successfully navigate the pandemic, and seem to be on a solid growth trajectory heading into 2021.
Moreover, for this time period, Greg Siokas, Chief Executive Officer of Cosmos Health, stated,
“Our proprietary line of nutraceuticals and food supplements, Sky Premium Life, continues to expand and we now have over 70 SKUs. We expect to reach 150 SKUs by the end of 2021 and believe the recent as well as upcoming additions to our portfolio will become major drivers of our growth going forward.”
To achieve their growth objectives, in October 2021, the Company successfully completed a capital raise totaling $7.5M, in which they had great participation from seasoned investors.
Cosmos Health seems to have built a highly scalable business model and is likely to keep enhancing profitability and cash flow as they leverage their fixed cost infrastructure and gain economies of scale. They operate 3 state-of-the-art warehouses with advanced automation technology that substantially expands their current capacity to support their planned growth.
As discussed, it is expected that the demand for non-prescription wellness products such as food and dietary supplements will continue to increase as individuals are increasingly supplementing their nutritional intake.
With their product portfolio of patented and non-patented medicines, Cosmos Health contributes to the optimization of efficient medicinal care, and thereby lowering cost for health insurance funds, companies, and patients. Thus, with all the benefits it offers, and expected growth in the years to come, it remains a company to watch out for.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Click here to please visit our detailed disclosure