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YPSN

YPSN

CHF 303.5 CHF 4.14B market cap February 21, 2026
Ypsomed Holding AG YPSN BUFFETT / MUNGER / KLARMAN SUMMARY
1 SNAPSHOT
PriceCHF 303.5
Market CapCHF 4.14B
EVCHF 4.17B
Net Debt~CHF 0 (near net-cash post divestment)
Shares13.65M
2 BUSINESS

Ypsomed is the world's #2 contract autoinjector manufacturer (behind SHL Medical), supplying pharma and biotech companies with self-injection devices (autoinjectors, pens) for drugs across GLP-1/obesity, autoimmune, CNS, cardiovascular, and metabolic indications. Following the July 2025 divestment of its Diabetes Care business to TecMed AG for CHF 420M, Ypsomed is now a pure-play injection specialist with 130+ pharma partners and 230 contracted programs (70 commercial, 160 clinical). The company is a critical link in the GLP-1 supply chain via a long-term agreement with Novo Nordisk for YpsoMate autoinjectors. Family-controlled (Michel family 71.5%) with CEO Simon Michel (founder's son) running the company since 2014.

Revenue: CHF 748.9M (FY25 consolidated); DS only ~CHF 502M Organic Growth: 21.0% (Delivery Systems, H1 FY26)
3 MOAT NARROW-TO-WIDE

Four reinforcing moat elements: (1) Extreme switching costs -- autoinjectors are filed as part of drug regulatory approvals; changing device requires new regulatory submissions costing $20-50M and 2-3 years per program. "Once approved, it's like a marriage in a Catholic way, where divorce doesn't exist." (2) Regulatory barriers -- ISO 13485, FDA 21 CFR 820, EU MDR compliance require 3-5 years to establish. (3) Relationship depth -- 130+ pharma partners, 230 programs, decades of co-development trust. (4) Manufacturing scale -- 100M+ autoinjectors delivered since 2018, expanding capacity globally with "local for local" strategy. The moat is widening as more programs enter commercial stage and capacity investments create customer lock-in.

4 MANAGEMENT
CEO: Simon Michel (since 2014, founder's son)

True owner-operator: Michel family controls 71.5% of shares. CEO Simon Michel (12 years tenure) led strategic transformation from diversified medtech to pure-play injection specialist. Executed Diabetes Care divestment at favorable price (CHF 420M). Disciplined dividend policy (35% target payout, CHF 2.20/share). Organic capex focused on contracted demand. No value-destroying M&A. Manufacturing expansion follows "local for local" strategy aligned with customer requirements.

5 ECONOMICS
32.4% (Delivery Systems, H1 FY26) Op Margin
~20% (ROCE, company-reported, continuing ops) ROIC
-CHF 57.4M (FY25; heavy capex cycle, FCF positive in ~3 years) FCF
0.3x (post-divestment) Debt/EBITDA
6 VALUATION
FCF/ShareNegative (capex cycle)
FCF YieldNegative (capex cycle)
DCF RangeCHF 270 - 428

Conservative: CHF 164M owner earnings growing 15% for 5 years, 8% for years 6-10, 2.5% terminal, 7.5% discount = CHF 428. Bear: 10%/5% growth, 9% discount = CHF 270. Earnings multiple: FY27E normalized EPS CHF 13-15 at 22-25x = CHF 286-375. Private market: FY26E EBITDA ~CHF 250M at 18-22x = CHF 330-403/share.

7 MUNGER INVERSION -28.5%
Kill Event Severity P() E[Loss]
Novo Nordisk shifts to SHL Medical or in-sources autoinjectors -50% 15% -7.5%
Oral GLP-1 achieves injectable parity, demand collapses -40% 15% -6.0%
Multiple compression from growth disappointment -30% 20% -6.0%
Capex overbuilding; capacity remains underutilized -35% 10% -3.5%
CHF appreciation erodes reported earnings persistently -10% 30% -3.0%
SHL Medical wins next-gen GLP-1 supply contracts -25% 10% -2.5%

Tail Risk: The catastrophic scenario is a simultaneous Novo Nordisk relationship termination (CagriSema failure + supplier switch) combined with oral GLP-1 formulations proving clinically superior to injectables for the obesity indication. Ypsomed would be left with CHF 200M+ of newly built capacity chasing a shrinking market, with its most important customer gone. FCF would remain deeply negative for years. Combined with multiple compression to 10-12x depressed earnings, this could mean 60-70% downside. Probability: <5%.

8 KLARMAN LENS
Downside Case

In the bear case, oral GLP-1 formulations gain rapid traction starting 2028, reducing demand growth for injectable devices to low single digits. Novo Nordisk diversifies its supply chain away from Ypsomed. Revenue grows 5-8% instead of 20%, EBIT margin compresses to 25% as capacity is underutilized. Stock de-rates to 14-16x on CHF 8-10 EPS = CHF 130-160. Heavy capex investments become sunk costs.

Why Market Wrong

The market is applying a broad GLP-1 correction to a company whose growth is driven not just by GLP-1 but by 230 programs across multiple therapy classes. The 71.5% family ownership and 32.4% EBIT margin are underappreciated. The stock has been treated as a GLP-1 beta play when it's actually a platform business with deep switching costs. The divestment of Diabetes Care simplifies the story and unlocks value. At 21x TTM earnings (distorted by divestment gain), the market isn't giving credit for the FCF inflection coming in 2027-2028.

Why Market Right

The bears could be right if: (1) Oral GLP-1s genuinely replace injectables for the majority of obesity patients -- Novo's oral CagriSema filing suggests this is plausible; (2) Ypsomed's business is more concentrated in Novo Nordisk than disclosed, making it essentially a single-customer play at 20x+ earnings; (3) the capex cycle is destroying value because management is empire-building capacity that won't be utilized. The 31% pullback from ATH may simply be a rational correction from GLP-1 euphoria rather than a mispricing opportunity.

Catalysts

(1) FY26 results in May 2026 beating EBIT guidance of CHF 190-210M; (2) Novo Nordisk CagriSema FDA approval validating autoinjector demand; (3) US manufacturing facility announcement demonstrating commitment to local production; (4) FCF turning positive by FY27/28 as capex cycle matures; (5) Additional major pharma supply agreements beyond Novo; (6) Market re-rating of pure-play delivery systems model.

9 VERDICT WAIT
A- T2 Resilient
Strong BuyCHF 230
BuyCHF 285
SellCHF 450

Ypsomed is a high-quality, owner-operated business (71.5% family ownership) with genuine switching costs and structural exposure to the GLP-1 megatrend. The 32.4% EBIT margin in Delivery Systems, ~20% ROCE, and 2029/30 targets of CHF 0.9-1.1B revenue / CHF 280-340M EBIT are compelling. However, at CHF 303.50 the stock offers only 10-20% margin of safety vs estimated intrinsic value of CHF 340-380, which is insufficient given customer concentration risk (Novo Nordisk), negative FCF from the heavy capex cycle, and the real threat of oral GLP-1 substitution. WAIT for CHF 230-285 to accumulate; this would provide the 20-35% margin of safety appropriate for the risk profile. At CHF 230, it becomes a strong buy at ~15x FY27 earnings. Position size: 2-3% of portfolio at accumulate prices.

🧠 ULTRATHINK Deep Philosophical Analysis

YPSN - Ultrathink Analysis

The Real Question

We are not asking "will Ypsomed's stock go up?" We are asking something more fundamental: Is the world entering a permanent era of injectable self-medication, and is Ypsomed an inevitable winner in that era?

The GLP-1 revolution -- Ozempic, Wegovy, CagriSema, and the dozens of next-generation obesity and metabolic drugs in clinical pipelines -- has created a gold rush. But Ypsomed does not mine gold. It sells the picks and shovels. Or more precisely, it makes the barrels the gold gets shipped in. Every single dose of a GLP-1 drug that is injected subcutaneously requires a device. Someone has to manufacture that device to pharmaceutical standards, validate it through regulators, and deliver it in the billions. Ypsomed does exactly that.

The deeper question is whether this is a transient demand spike -- a wave that crests and recedes as oral formulations replace injectables -- or a permanent structural shift toward self-administered injectable therapies across multiple drug classes. The answer determines whether Ypsomed is a CHF 2B company riding a cycle or a CHF 10B company riding a trend.

Hidden Assumptions

What the market assumes:

  1. Ypsomed is primarily a GLP-1 play, and its fortunes are tied to Novo Nordisk's pipeline
  2. Oral GLP-1 formulations will eventually replace injectables for most patients
  3. The heavy capex cycle represents execution risk, not demand-led investment
  4. At 21x TTM earnings, the stock is fairly priced for a contract manufacturer
  5. The 31% correction from ATH reflects rational repricing, not a sentiment overshoot

What we assume:

  1. Switching costs in combination device approvals create durable moats lasting 10-15 years per program
  2. Injectable delivery will remain preferred for biologics (large molecules cannot be taken orally) -- GLP-1 is just the current headline
  3. Ypsomed's 230 programs across 130+ partners provide meaningful diversification beyond Novo Nordisk
  4. The capex cycle is demand-led (contracted volumes) and will yield 20%+ ROCE as capacity utilizes
  5. The Michel family's 71.5% ownership ensures long-term capital allocation discipline
  6. The stock will re-rate as the pure-play model proves itself and FCF turns positive

The assumption most likely to be wrong: Our assumption #2. The oral vs. injectable debate is the existential question for this business. If Novo Nordisk's oral CagriSema proves effective and becomes the preferred formulation for obesity treatment, the single largest demand driver for Ypsomed's autoinjectors could erode within 5-7 years. This is not speculative -- Novo filed for FDA approval of oral CagriSema. The question is whether oral efficacy matches injectable for the mass market, or whether injectables retain superiority for certain patient populations and indications. History suggests both will coexist, but the relative mix matters enormously for Ypsomed.

The Contrarian View

For the bears to be completely right, you would need to believe the following story:

Ypsomed is a glorified contract manufacturer riding a single customer and a single trend. The Novo Nordisk autoinjector deal is the business -- strip that out, and you have a mid-single-digit growth company making commodity injection devices. The GLP-1 autoinjector demand surge is a 5-7 year window before oral formulations dominate, and Ypsomed is pouring CHF 200M+ per year into factories that will be half-empty by 2032. The Michel family controls 71.5% of the stock and can do whatever they want with the company -- minority shareholders are along for the ride with no governance protection. At 21x earnings for a Swiss mid-cap with negative free cash flow, customer concentration, and a product category facing obsolescence risk, this is not cheap -- it is a value trap dressed up in a GLP-1 costume. The stock rose 171% in three years on pure narrative momentum and is now returning to earth.

This is a forceful bear case. But it fails on three counts:

First, it ignores the regulatory moat. A pharma company cannot simply switch autoinjector suppliers. The device is part of the regulatory filing. Switching requires new submissions, new testing, and years of work. Ypsomed's 70 commercial programs are sticky for 10-15 years each. This is not a commodity business.

Second, it assumes oral wins completely. But oral GLP-1s face fundamental challenges: gastrointestinal side effects are more pronounced, bioavailability is lower (requiring larger doses), and the convenience of a once-weekly injection versus daily oral dosing is debatable. More importantly, the broader biologics universe -- monoclonal antibodies, gene therapies, hormone treatments -- cannot be delivered orally. GLP-1 is the headline, but autoimmune, CNS, and cardiovascular biologics are the long tail.

Third, it conflates customer concentration with customer dependence. Yes, Novo Nordisk is the largest customer. But Ypsomed has 129 other pharma partners and 160 clinical programs that represent future commercial contracts. The pipeline is the moat.

But we must be honest: the oral risk is real and non-trivial. If oral GLP-1 captures 50%+ of the obesity market by 2032, Ypsomed's growth trajectory would slow materially.

Simplest Thesis

A rare owner-operator (71.5% family-owned, founder's son as CEO) building essential infrastructure for the injectable biologics revolution -- with switching costs so high that once you are in, you stay in for decades -- temporarily derated because the market is conflating a GLP-1 sentiment correction with fundamental impairment.

Why This Opportunity Exists

The opportunity exists because Ypsomed sits at the intersection of two powerful but conflicting narratives:

  1. The GLP-1 hype cycle is cooling. After the euphoria of 2023-2025, sentiment around GLP-1-adjacent stocks has corrected. CagriSema trial uncertainty, oral formulation progress, and the general rotation away from "GLP-1 supply chain" plays has dragged down the entire complex. Ypsomed was caught in this tide despite its diversified program pipeline.

  2. The business transformation creates a "no man's land." The old Ypsomed (diabetes pumps + injection devices) was a well-understood conglomerate. The new Ypsomed (pure-play injection specialist) is a different animal. Investors need to re-underwrite the thesis. The Diabetes Care divestment was completed only 7 months ago. Institutional investors who owned the old Ypsomed may not want the new one, and those who want the new one may not have discovered it yet.

  3. Negative free cash flow repels value investors. FCF was -CHF 57.4M in FY25. For investors who screen on FCF yield or free cash flow, Ypsomed is invisible or unattractive. But the negative FCF is a feature, not a bug -- it reflects a demand-led capex cycle that will yield high-ROCE production capacity. By FY27/28, management expects FCF to turn positive as volumes ramp on the new capacity.

  4. Swiss small-cap obscurity. Trading on the SIX Domestic Standard (not the main board) with a CHF 4.1B market cap, Ypsomed receives limited international analyst coverage compared to medical device companies of similar quality.

What Would Change My Mind

  1. Novo Nordisk announces a change in autoinjector supplier for any current commercial product. This would signal that the "Catholic marriage" metaphor is breaking down and switching costs are lower than believed.

  2. Oral GLP-1 achieves non-inferiority to injectable in a large Phase III trial AND shows lower GI side effects. This would undermine the injectable permanence thesis for the largest demand driver.

  3. Ypsomed's Delivery Systems EBIT margin falls below 25% for two consecutive half-year periods. This would indicate that the operating leverage thesis is failing and competitive dynamics are compressing economics.

  4. The Michel family reduces their stake below 50%. This would remove the owner-operator anchor and introduce governance uncertainty.

  5. Management pushes the FCF-positive timeline beyond FY28. This would suggest the capex cycle is out of control and returns on invested capital are deteriorating.

  6. Ypsomed fails to win significant new commercial contracts outside Novo Nordisk within 2 years. This would confirm the customer concentration bear case.

The Soul of This Business

At its core, Ypsomed exists because modern medicine has created extraordinary drugs that must be injected under the skin -- and patients cannot do that without a precisely engineered device.

Think about what an autoinjector actually does. It takes a glass syringe filled with a precisely formulated biological compound -- a molecule too large and too fragile to survive the acidic journey through the stomach -- and delivers it through the skin into subcutaneous tissue at the exact right depth, angle, and speed. It must work perfectly every single time, in the hands of a patient who may be elderly, have limited dexterity, or be anxious about needles. It must be safe enough that a child could not accidentally trigger it. It must be manufactured to pharmaceutical standards in cleanrooms, validated through multi-year regulatory processes, and produced in the hundreds of millions.

This is not simple. This is not a commodity. When a pharmaceutical company spends a billion dollars developing a biologic drug, the last thing they want is uncertainty about the delivery device. They want a partner who has done it a hundred million times before, who has the regulatory track record, the manufacturing capacity, and the engineering expertise to guarantee that every single dose reaches every single patient safely and reliably.

That is what Ypsomed provides. And once the drug is approved with a specific autoinjector as part of the combination product filing, switching becomes nearly impossible without going through the regulatory process again.

The soul of this business is the intersection of Swiss precision engineering, pharmaceutical-grade manufacturing, and deep regulatory expertise -- applied at industrial scale to solve a problem that is getting bigger every year as biological medicines proliferate. The GLP-1 wave is just the most visible manifestation. Behind it come dozens of monoclonal antibodies for autoimmune diseases, gene therapies, hormone treatments, and combination therapies -- all requiring subcutaneous injection, all requiring devices, all requiring a manufacturer that pharma companies trust with their most valuable products.

Willy Michel saw this decades ago when he founded the company. His son Simon has positioned it brilliantly for this moment. The family has 71.5% of their wealth riding on getting this right. That is the kind of alignment that Buffett and Munger would admire -- the owner and the operator are the same person, with their entire economic life dependent on the success of the enterprise.

The question is not whether the world needs more autoinjectors. It does. The question is whether the world needs them at the rate that justifies Ypsomed's current valuation and capex cycle. On this, reasonable people can disagree. The oral GLP-1 threat is real. The customer concentration in Novo Nordisk is real. The capex execution risk is real. But the structural position -- 230 programs, 130+ partners, regulatory moats, family ownership -- is also real, and it is rare.

At CHF 303.50, we are being asked to pay a fair-to-slightly-discounted price for a business that could be worth significantly more if the injectable era proves as durable as the evidence suggests. We would prefer to pay less. The patient investor's path is to wait for the market to give us a better price -- perhaps during a broader correction, a Novo Nordisk-specific scare, or a quarter of disappointing results. The business will still be here. The programs will still be locked in. And the demographic and pharmaceutical trends driving demand for injectable self-medication will still be accelerating.

When the opportunity arrives -- and if you are patient, it usually does -- the right action will be to act decisively, with the confidence that comes from understanding both the quality of the business and the risks that could impair it.

Executive Summary

Investment Thesis (3 Sentences)

Ypsomed is the world's #2 contract autoinjector manufacturer for pharma/biotech, positioned at the heart of the GLP-1 obesity/diabetes megatrend through long-term supply agreements with Novo Nordisk and 130+ pharma partners across 230 clinical/commercial programs. The company has transformed itself into a pure-play injection specialist by divesting its Diabetes Care business for CHF 420M, and is now guiding for CHF 0.9-1.1B revenue and CHF 280-340M EBIT by 2029/30 (30%+ margins, ~20% ROCE). At CHF 303.50 with a TTM P/E of 21x (distorted by divestment gain), the stock trades 31% below its July 2025 ATH, offering a potential entry point into a rare owner-operator with 71.5% family ownership, massive switching costs, and structural demand tailwinds -- though the current heavy capex cycle and customer concentration warrant patience.

Key Metrics Dashboard

Metric Value Assessment
Price CHF 303.50 -31% from ATH (CHF 441.50)
EPS (TTM) CHF 14.21 Inflated by divestment gain
EPS (FY25, normalized) CHF 6.41 Continuing ops basis
P/E (TTM) 21.4x Distorted; forward ~21-23x
Delivery Systems EBIT Margin 32.4% (H1 26) Exceptional for contract manufacturer
ROCE ~20% Company-reported, continuing ops
Net Debt/EBITDA 0.3x De-leveraged via divestment proceeds
FCF Negative Heavy capex cycle; expected positive in 3 years
Dividend Yield 0.73% Low; 35% target payout ratio
Revenue Growth (DS) +21% H1 Structural demand acceleration
Moat NARROW-TO-WIDE Switching costs + regulatory barriers

Decision

Price (CHF) Forward P/E (est.) Margin of Safety
Strong Buy < 230 < 15x > 35%
Accumulate 230 - 285 15-19x 20-35%
Fair Value 340 - 380 22-25x At intrinsic value
Overvalued > 450 > 30x Premium territory
Current (303.50) 303.50 ~21x ~15% below estimated IV

RECOMMENDATION: WAIT Position Size: 2-3% of portfolio (at accumulate prices) Catalyst: GLP-1 demand cycle + capex cycle completion + FY27 FCF inflection

Phase 0: Opportunity Identification (Klarman)

Why Does This Opportunity Exist?

1. Post-Hype Correction from GLP-1 Euphoria Ypsomed's stock surged from CHF 163 (March 2022) to CHF 441.50 (July 2025) -- a 171% rally -- driven by the GLP-1 (Ozempic/Wegovy) supply chain thesis. The Novo Nordisk autoinjector supply agreement (September 2023) was the catalyst. The correction from CHF 441 to CHF 303 (-31%) reflects several factors: Novo Nordisk's CagriSema trial uncertainty, general GLP-1 sentiment cooling, and profit-taking after the re-rating. The stock may have overshot to the downside.

2. Business Transformation Creates Uncertainty The sale of Diabetes Care (pumps, pen needles) to TecMed AG in July 2025 for up to CHF 420M fundamentally changed Ypsomed. It is now a pure-play contract delivery systems company. Investors comfortable with the old diversified model need to re-underwrite the thesis. This transition creates a window of mispricing.

3. Heavy Capex Cycle Depresses FCF CapEx surged to CHF 205.6M in FY25 (vs. CHF 51.6M in FY22) as Ypsomed builds new manufacturing halls in Schwerin (Germany) and plans US facilities. FCF was -CHF 57.4M in FY25. Investors focused on near-term cash generation are understandably cautious. But this capex is demand-led -- it reflects contracted customer commitments, not speculative expansion.

4. Swiss Small-Cap with Limited Analyst Coverage Ypsomed trades on the SIX Domestic Standard (not the main board), has a CHF 4.1B market cap, and is followed by relatively few international analysts. This creates structural mispricing potential for global investors.

Phase 1: Risk Analysis (Inversion)

"All I want to know is where I'm going to die, so I'll never go there." -- Munger

How Could This Investment Lose 50%+ Permanently?

1. Customer Concentration: Novo Nordisk Dependency (P=15%, Impact=-50%) Novo Nordisk is Ypsomed's most significant customer via the long-term autoinjector supply agreement. If Novo's CagriSema fails clinical trials, or if Novo in-sources autoinjector production, or if a competitor wins the next supply contract, Ypsomed would lose its most important growth engine. The "Catholic marriage" nature of device regulatory approval provides protection, but Novo could theoretically shift to SHL Medical for next-generation devices.

2. GLP-1 Demand Reversal or Oral Substitution (P=15%, Impact=-40%) The GLP-1 thesis assumes injectable delivery remains dominant for obesity/metabolic drugs. If oral GLP-1s (Novo's Rybelsus, Lilly's orforglipron) achieve efficacy parity with injectables, the demand for autoinjectors could plateau or decline. Novo Nordisk filed for FDA approval of oral CagriSema in late 2025. If oral formulations dominate by 2030, Ypsomed's growth trajectory would be severely impaired.

3. Capex Cycle Destruction: Overbuilding (P=10%, Impact=-35%) Ypsomed is spending CHF 200M+ annually on capacity expansion. If demand doesn't materialize as expected (e.g., due to oral substitution, regulatory delays, or Novo shifting suppliers), these investments become underutilized assets. The FCF burn could persist well beyond the 3-year management timeline.

4. SHL Medical Competition (P=10%, Impact=-25%) SHL Medical (also Swiss) is the #1 autoinjector manufacturer globally. SHL opened a USD 220M manufacturing facility in South Carolina in April 2025. If SHL captures the next wave of GLP-1 supply contracts (e.g., with Lilly), Ypsomed's growth narrative weakens. Stevanato, West Pharma, and Becton Dickinson are also investing in the space.

5. Valuation Multiple Compression (P=20%, Impact=-30%) At ~21x forward earnings, Ypsomed is priced for significant growth execution. If delivery disappoints for even 2-3 quarters, the market could de-rate the stock to 15x, representing ~30% downside from current levels.

6. Swiss Franc Headwind (P=30%, Impact=-10%) Like all Swiss exporters, CHF appreciation structurally erodes reported earnings when global revenues are earned in EUR and USD. This is a persistent headwind, not a one-time event.

Inversion Summary

Risk P(Event) Impact Expected Loss
Novo Nordisk dependency 15% -50% -7.5%
Oral GLP-1 substitution 15% -40% -6.0%
Capex overbuilding 10% -35% -3.5%
SHL competition wins 10% -25% -2.5%
Multiple compression 20% -30% -6.0%
CHF headwind 30% -10% -3.0%
Total Expected Downside -28.5%

Bear Case in 3 Sentences

Ypsomed is a contract manufacturer riding a single customer (Novo Nordisk) and a single therapy class (GLP-1 injectables) while spending aggressively on capacity it may never fully utilize. Oral GLP-1 formulations could undermine the entire injectable delivery thesis within 5 years. At 21x earnings with negative free cash flow, the stock offers insufficient margin of safety for the concentration risk embedded in the business.

Sell Triggers (Non-Price)

  1. Novo Nordisk announces in-sourcing of autoinjector production or switches to SHL Medical
  2. Oral GLP-1 achieves clinical superiority to injectable in a head-to-head trial
  3. Management abandons the 2029/30 targets or pushes FCF-positive timeline beyond 2028
  4. Ypsomed loses 3+ commercial pharma programs in a single year
  5. EBIT margin falls below 25% in the Delivery Systems segment for two consecutive halves

Phase 2: Financial Analysis

Profitability Trajectory (CHF millions)

Metric FY21 FY22 FY23 FY24 FY25 H1 26 (ann.)
Revenue 403.7 464.8 497.5 548.5 748.9 ~530*
Gross Margin 23.5% 24.5% 28.3% 40.0% 39.0% ~39%
EBIT Margin 2.3% 6.2% 8.7% 15.7% 16.4% 32.4%**
Net Margin 1.4% 5.0% 10.3% 14.3% 11.7% -

*Delivery Systems only, annualized from H1 CHF 266.6M **Delivery Systems only; consolidated includes divestment gain

The profitability improvement is extraordinary. Delivery Systems EBIT margin has gone from single digits to 32.4% in H1 FY25/26. This reflects operating leverage as volumes scale on the autoinjector platform.

ROE Decomposition (DuPont)

Using FY25 data:

  • Net Income/Revenue (Margin): 87.5/748.9 = 11.7%
  • Revenue/Assets (Turnover): 748.9/1,330.3 = 0.56x
  • Assets/Equity (Leverage): 1,330.3/679.7 = 1.96x
  • ROE = 11.7% x 0.56 x 1.96 = 12.9%

Using TTM data (post-divestment):

  • Net Income = CHF 194M (includes gain)
  • Equity = CHF 807.2M
  • ROE = 194/807.2 = 24.0% (inflated by one-off gain)

Normalized continuing-ops ROE (est. FY26): ~17-20% (based on guided EBIT of 190-210M, ~13% tax, on ~CHF 800M equity)

ROIC vs WACC

Company-reported ROCE of ~20% on continuing operations.

Estimated WACC for a Swiss medical device company:

  • Risk-free rate (CHF 10yr): ~0.7%
  • Equity risk premium: 5.5%
  • Beta: ~1.0 (medical devices)
  • Cost of equity: ~6.2%
  • Cost of debt (post-tax): ~2.0%
  • D/E: ~0.01 (post-divestment, nearly net-cash)
  • WACC: ~6.0%

ROIC/WACC spread: ~14 percentage points. This is exceptional and indicates strong value creation.

Owner Earnings Calculation

Using FY26 guidance (Delivery Systems only):

  • Estimated EBIT: CHF 200M (midpoint of 190-210M)
  • Estimated tax (13%): CHF 26M
  • Estimated net income (cont. ops): CHF 174M
  • Add back D&A (est.): CHF 50M
  • Less maintenance capex (est.): CHF 60M
  • Less growth capex allocated: CHF 140M
  • Owner Earnings (maintenance basis): ~CHF 164M
  • Owner Earnings per share: CHF 12.01

Valuation

1. DCF Valuation (Conservative)

Assumptions:

  • Base year owner earnings: CHF 164M (maintenance basis)
  • Growth years 1-5: 15% (capacity expansion + GLP-1 demand)
  • Growth years 6-10: 8% (normalized)
  • Terminal growth: 2.5%
  • Discount rate: 7.5%

5-year cumulative PV of cash flows: ~CHF 1,035M Years 6-10 PV: ~CHF 1,010M Terminal PV: ~CHF 3,800M Total enterprise value: ~CHF 5,845M Less net debt: ~CHF 0 (near net-cash) Equity value: ~CHF 5,845M Per share: CHF 428

2. DCF Valuation (Bear Case)

Assumptions:

  • Growth years 1-5: 10%
  • Growth years 6-10: 5%
  • Terminal growth: 2%
  • Discount rate: 9%

Per share: CHF 270

3. Earnings Multiple Approach

FY27E normalized EPS (est.): CHF 13-15

  • At 20x: CHF 260-300
  • At 25x: CHF 325-375
  • At 30x: CHF 390-450

4. Private Market Value

Medical device contract manufacturers trade at 15-25x EBITDA in M&A. FY26E EBITDA (cont. ops): ~CHF 250M (guided EBIT 200M + ~50M D&A)

  • At 18x: CHF 4,500M = CHF 330/share
  • At 22x: CHF 5,500M = CHF 403/share

Valuation Summary

Method Value/Share vs Current Margin of Safety
DCF Conservative CHF 428 +41% 29%
DCF Bear Case CHF 270 -11% Negative
Earnings (22x FY27E) CHF 308 +1% ~0%
Earnings (25x FY27E) CHF 350 +15% 13%
Private Market (18x) CHF 330 +9% 8%
Private Market (22x) CHF 403 +33% 25%

Estimated Intrinsic Value: CHF 340-380 (weighted average) Current margin of safety at CHF 303.50: ~10-20%

This is below the 20-30% threshold typically required. The stock is not cheap enough for aggressive accumulation but is approaching fair value territory.

Phase 3: Moat Analysis

Moat Sources

1. Switching Costs (Primary Moat -- WIDE)

This is the crown jewel. Once a pharmaceutical company selects an autoinjector device for a drug program, switching is extraordinarily difficult:

  • The autoinjector becomes part of the drug's regulatory filing (the "combination product")
  • Changing the device requires new regulatory submissions (FDA, EMA)
  • Clinical trials must demonstrate bioequivalence with the new device
  • As one industry expert described it: "Once this is approved, it's like a marriage, in a very Catholic way, where divorce doesn't exist."
  • The typical commercial lifecycle of a device-drug combination is 10-15 years
  • Ypsomed has 70 programs in commercial stage and 160 in clinical development

Quantification: Switching cost = 2-3 years of regulatory work + USD 20-50M per program. For a pharma company with USD 5B+ in drug revenue dependent on a specific autoinjector, this is prohibitively expensive.

2. Regulatory Barriers (MODERATE)

Medical device manufacturing requires:

  • ISO 13485 quality management certification
  • FDA 21 CFR Part 820 compliance
  • EU MDR (Medical Device Regulation) certification
  • Cleanroom manufacturing validated to pharmaceutical standards
  • Years of track record for pharma companies to trust a supplier

New entrants face 3-5 year lead times just to establish the regulatory infrastructure.

3. Customer Relationships and Pipeline (MODERATE-TO-WIDE)

Ypsomed has relationships with 130+ pharma/biotech partners across 230 programs. Many are multi-year development partnerships where Ypsomed co-designs the device with the drug company. This creates deep integration and trust that takes years to establish. The project pipeline (CHF 51.5M revenue in H1, +20.2%) represents future commercial programs -- a visible and growing backlog.

4. Manufacturing Scale and Expertise (MODERATE)

Ypsomed has manufactured 100M+ prefilled autoinjectors since 2018. This manufacturing know-how, combined with capacity investments, creates barriers. The "local for local" expansion strategy (US, China, Switzerland/EU) adds logistical advantages and reduces customer supply chain risk.

Moat Durability Assessment

Threat Severity (1-5) Timeline Company Mitigation
Oral GLP-1 substitution 4 5-10 years Diversified drug class exposure (autoimmune, CNS, etc.)
SHL Medical competition 3 Ongoing 230 programs, switching costs, capacity expansion
Customer in-sourcing 2 Low probability Pharma prefers outsourcing non-core functions
Technology leapfrog 2 Low Platform approach, continuous R&D
Stevanato/BD entry 2 3-5 years Established relationships, regulatory track record

Moat Trajectory: WIDENING over next 5 years (more programs entering commercial stage, manufacturing scale increasing, GLP-1 demand growing), then stable. Oral substitution is the key long-term risk to monitor.

Phase 4: Management & Owner-Operator Assessment

The Michel Family: True Owner-Operators

This is one of the most compelling aspects of the Ypsomed thesis.

Willy Michel (founder) and his family control 71.5% of all shares through a family shareholder agreement. This is not a passive stake -- Simon Michel (Willy's son) serves as CEO. The family's interests are perfectly aligned with minority shareholders because:

  • The Michel family's net worth is overwhelmingly concentrated in Ypsomed
  • They think in generations, not quarters
  • Capital allocation decisions directly affect the family's wealth
  • There is no agency problem -- management IS the owner

Simon Michel, CEO (since 2014)

  • Son of founder Willy Michel
  • 20 years at the company (since 2006)
  • Led the strategic transformation from diabetes care diversification to pure-play injection specialist
  • Orchestrated the Novo Nordisk partnership and GLP-1 pivott
  • Executed the Diabetes Care divestment at a favorable price (up to CHF 420M)

Capital Allocation Track Record

  • Diabetes Care sale at attractive valuation, using proceeds to de-leverage and fund organic growth capex
  • Disciplined dividend policy (35% target payout ratio, growing with earnings)
  • Organic capex focused on contracted demand, not speculative expansion
  • No value-destroying acquisitions
  • Manufacturing expansion aligned with "local for local" customer requirements

Governance Consideration: The 71.5% family ownership means minority shareholders have limited influence. However, the family's interests (long-term value creation) align well with value investors. The risk is if the family extracts value through related-party transactions or governance lapses -- there is no evidence of this.

Management Grade: A-

The combination of genuine skin in the game (71.5% ownership), a long-tenured CEO who has successfully transformed the business, and disciplined capital allocation earns a high grade. The slight deduction is for customer concentration risk (heavy reliance on the Novo Nordisk relationship) and the inherent governance risk of a family-controlled company.

Phase 5: Catalyst Analysis

Catalyst Timeline Probability Impact
GLP-1 demand acceleration (Wegovy, CagriSema launches) 2026-2028 60% +20-30%
Capex cycle completion, FCF turns positive 2027-2028 65% +15-20%
FY26 results beat guidance (>CHF 210M EBIT) May 2026 50% +10-15%
New US manufacturing facility announcement 2026 70% +5-10%
Additional pharma supply agreements Ongoing 70% +10-15%
Market re-rates pure-play model 2026-2027 55% +15-20%

Negative Catalysts:

Risk Event Timeline Probability Impact
Novo CagriSema trial failure or delay 2026-2027 20% -20-30%
Oral GLP-1 achieves injectable parity 2027-2030 15% -25-40%
Capex overrun or delay 2026-2028 15% -10-15%

Phase 6: Decision Synthesis

Expected Return Probability Tree

Scenario Probability 3-Year Return Weighted Return
Bull: GLP-1 demand exceeds expectations, 2029/30 targets achieved early, P/E re-rates to 28x 20% +80% +16.0%
Base: 2029/30 targets met, EBIT at CHF 310M midpoint, P/E of 23x 45% +35% +15.8%
Bear: Growth slows, oral GLP-1 gains traction, P/E compresses to 16x 25% -15% -3.8%
Disaster: Key customer loss + oral substitution, P/E at 12x 10% -50% -5.0%
Expected 100% +23.0%

3-year annualized expected return: ~7.1%. This is adequate but not compelling given the risks.

Megatrend Resilience Screen

Megatrend Score Notes
China Tech Superiority +1 Ypsomed expanding in China; not competing with Chinese firms
Europe Degrowth 0 Headquartered in Switzerland; diversified global demand
American Protectionism +1 "Local for local" US facility mitigates tariff risk
AI/Automation +1 Manufacturing benefits from automation; not displaced
Demographics/Aging +2 GLP-1 obesity epidemic + aging population = structural demand
Fiscal Crisis 0 Swiss company; low debt; pharma demand relatively acyclical
Energy Transition 0 Neutral; minimal energy exposure

Total Score: +5 | Tier: T2 "Resilient"

Position Sizing

At current prices (CHF 303.50), the margin of safety is ~10-20%, which is below the 20%+ threshold for initiating a position. The expected 3-year return of ~23% (7.1% annualized) is adequate but doesn't provide sufficient compensation for the customer concentration and capex execution risks.

Recommended action: WAIT for CHF 230-285 range (accumulate zone)

At CHF 260 (17x FY27E earnings), the margin of safety would be 25-30%, making it an attractive accumulate opportunity. At CHF 230 (15x), it would be a strong buy.

Monitoring Metrics

Metric Current Threshold Action if Breached
Delivery Systems EBIT Margin 32.4% < 25% for 2 halves Review thesis
Delivery Systems Revenue Growth +21% < 10% for 2 halves Review thesis
FCF -21.7M TTM Still negative in FY28 Review thesis
Novo Nordisk relationship Active, expanding Any sign of supply shift Sell trigger
Oral GLP-1 trial data Injectable superior Injectable parity reached Reduce position
Net Debt/EBITDA 0.3x > 2.5x Review thesis

Sources Used

Primary Company Documents

Document Source Key Data
FY2024/25 Full Year Results Ypsomed Ad-hoc Revenue, EBIT, net income, EPS
H1 2025/26 Results Ypsomed Ad-hoc Segment breakdown, guidance
Capital Markets Day 2025 Ypsomed IR 2029/30 targets, strategy
Share Data Ypsomed IR Shares Outstanding shares, price history, ownership
Corporate Governance Ypsomed IR Michel family 71.5% stake

Financial Data Sources

Source Data Retrieved
StockAnalysis.com 5-year income statement, balance sheet, cash flow, dividend history
Ypsomed IR Website Annual report links, financial calendar, shareholder data
FierceBiotech Novo Nordisk supply agreement details
MarketScreener Annual report summaries, market data

Industry Research

Source Data
MarketsandMarkets Autoinjector market structure (SHL #1, Ypsomed #2)
FierceBiotech Diabetes Care divestment (CHF 420M to TecMed)
Pharmaceutical Technology CagriSema supply chain analysis