Executive Summary / Key Takeaways

• Grifols is executing a robust Value Creation Plan, driving significant operational and financial improvements, evidenced by strong H1 2025 revenue growth of 7% at constant currency and a 12.7% increase in adjusted EBITDA. The company's vertically integrated, in-market, for-market business model provides a resilient foundation against global macroeconomic and geopolitical shifts.
• Technological differentiation in plasma processing and an accelerated innovation pipeline, including new IG purification facilities and advanced yield optimization projects, are enhancing efficiency, reducing costs, and strengthening Grifols' competitive moat.
• The company is making tangible progress on its deleveraging objectives, reducing its leverage ratio to 4.2x in H1 2025 from 5.5x in H1 2024, supported by EBITDA expansion, working capital management, and strategic capital allocation.
• Grifols has reaffirmed its 2025 guidance, with an improved outlook for Free Cash Flow (FCF) pre-M&A to EUR 375-425 million, signaling confidence in sustained profitability and cash generation.
• Despite a dynamic competitive landscape and regulatory uncertainties, Grifols' leadership in specialized plasma-derived therapies and strategic partnerships position it for continued market share gains and long-term value creation.

Grifols: A Century of Plasma Innovation and Strategic Resurgence

Grifols, a global healthcare leader founded in Barcelona in 1909, has built its legacy on improving health through plasma-derived medicines and transfusion solutions. The company's core business revolves around a vertically integrated, "in-market, for-market" strategy, encompassing plasma collection, manufacturing, and distribution across over 110 countries. This extensive global footprint, established through decades of strategic investments and international expansion, positions Grifols as a formidable player in the biopharmaceutical industry.

The company's historical journey, marked by key acquisitions like Talecris in 2011 and Novartis' (NVS) Diagnostic business in 2014, has shaped its diversified portfolio and integrated capabilities. Following the challenges of the COVID-19 pandemic, Grifols embarked on an ambitious Value Creation Plan, focusing on operational efficiency, corporate governance enhancements, and financial discipline. This strategic pivot, led by new executive leadership, aims to unlock the company's full potential and drive sustainable, profitable growth.

Technological Edge and Innovation Pipeline

Grifols' competitive advantage is deeply rooted in its differentiated technology and continuous innovation in plasma-derived therapies and diagnostics. The company operates the world's largest network of plasma donation centers, with nearly 400 facilities globally, ensuring a robust and diversified raw material supply.

Recent technological advancements underscore Grifols' commitment to efficiency and product enhancement. The company secured FDA approval for a new immunoglobulin (IG) purification facility, which is set to increase its Gamunex total capacity to 60 million grams per year. This approval, obtained in record time, is expected to enhance efficiencies significantly in terms of yield, recovery, and cost per gram. Furthermore, Grifols' R&D, manufacturing, and quality teams are actively engaged in projects to optimize gamma globulin yield, with pilot scale production showing promising results for a potential 6% improvement in manufacturing processes. Efforts at the plasma collection side aim to improve average donation yield by approximately 10% through initiatives like individualized nomogram implementation, currently at 60% adoption in U.S. centers. These quantifiable improvements directly translate into lower costs of goods, higher margins, and a stronger competitive moat.

The innovation pipeline is robust, with several key products nearing commercialization or advancing through clinical stages. Grifols is on track to launch Fibrinogen in Europe in the fourth quarter of 2025 and in the U.S. in the first half of 2026, following FDA approval. This product, with positive Phase 3 data published in The Lancet's eClinicalMedicine for acquired fibrinogen deficiency, targets a global estimated market value of up to $800 million. Other notable developments include the progression of the subcutaneous formulation trial for Alpha-1, the FDA clearance of an IND for a Phase 2 trial of IG drops for dry eye disease, and advancements in GigaGen projects for oncology and hepatitis B. In diagnostics, the ISARD platform is under development, targeting a launch by 2029-30, alongside FDA approval for a new highly automated manufacturing facility in San Diego for Gel Cards and reagent Red Blood Cells. These initiatives are crucial for sustaining market leadership, expanding into new therapeutic areas, and driving long-term financial performance.

Competitive Landscape and Strategic Positioning

Grifols operates in a highly competitive biopharmaceutical market, primarily against global players like CSL Limited (CSL), Takeda Pharmaceutical (TAK), and Baxter International (BAX). While precise, directly comparable market share figures for all niche competitors are not publicly detailed, Grifols maintains a leading 70% global market share in Alpha-1 antitrypsin, and its IVIG growth has outpaced the market.

Compared to CSL, Grifols' integrated approach, combining manufacturing and diagnostics, offers greater efficiency in serving healthcare providers. However, CSL's broader product diversification and market reach may give it an edge in overall global penetration. Grifols' specialized focus on rare diseases and its proprietary plasma processing technologies provide a competitive advantage, potentially leading to higher purity levels and stronger pricing power.

Against Takeda, Grifols' focused expertise in hemoderivatives may offer greater efficiency in certain production processes. Takeda's scale and extensive R&D capabilities, however, often translate to faster innovation speed and broader market positioning. Grifols' regulatory expertise, as demonstrated by rapid FDA approvals for new facilities, can ensure quicker market entry for its specialized products.

In comparison to Baxter, Grifols' offerings in plasma-derived medicines may provide better efficacy in specific therapeutic applications due to specialized manufacturing. Baxter's wider portfolio and presence in hospital supplies give it an advantage in market share capture. Grifols' strategic emphasis on rare and life-threatening conditions differentiates it in underserved segments.

Grifols' "in-market, for-market" strategy, with its diversified global network of plasma centers and manufacturing facilities, serves as a robust defense against geopolitical and macroeconomic uncertainties, including potential trade tariffs. This vertical integration minimizes reliance on external sourcing and strengthens its flexible structure. Strategic partnerships, such as with Shanghai RAAS and Haier in China, and self-sufficiency initiatives in Egypt and Canada, further enhance its local presence and responsiveness to regional demands. Management is also actively working to strengthen its commercial organization and regain key market accounts lost during periods of plasma shortages, indicating a proactive approach to competitive challenges.

Financial Performance and Liquidity

Grifols has demonstrated a strong financial resurgence, marked by consistent growth and improved profitability. In the first half of 2025, revenues reached EUR 3,677 million, representing a 7% increase at constant currency, primarily driven by the Biopharma segment's 8.2% constant currency growth. Adjusted EBITDA for H1 2025 increased to EUR 876 million, reflecting a 12.7% constant currency growth and a 23.8% margin, supported by product mix and continuous improvement initiatives. Group net profit surged to EUR 177 million, nearly four times the figure reported in H1 2024.

The Biopharma segment's immunoglobulin (IG) franchise was a key driver, with 12.5% constant currency growth in H1 2025, including an impressive 66% constant currency growth in subcutaneous IG (SCIG). Gross margin improved to 39.1% in H1 2025, up from 37.8% in H1 2024, largely due to strong revenue growth and a 22% reduction in the cost per liter (CPL) of plasma compared to its July 2022 peak. This CPL reduction is steadily reflected in the P&L due to the industry's typical 9-month inventory lag.

Free Cash Flow (FCF) pre-M&A significantly improved by EUR 182 million year-on-year, resulting in a negative EUR 14 million for H1 2025, with a positive EUR 30 million in Q2 2025. This improvement is attributed to EBITDA growth, effective working capital management, and reduced interest costs.

The company's liquidity stands at a robust EUR 1.40 billion as of H1 2025. Grifols has also made substantial progress in deleveraging, reducing its leverage ratio to 4.2x in H1 2025, down from 4.5x in Q1 2025 and 5.5x in H1 2024. This deleveraging is a core priority, with approximately 75% of its debt linked to fixed interest rates and no significant maturities before May 2027.

Capital expenditures (CAPEX) in H1 2025 were EUR 109 million, primarily directed towards new Biopharma production facilities in Montreal and Dublin, with the next major CapEx expansion wave projected for 2028.

Outlook and Guidance

Grifols has reaffirmed its 2025 guidance, with an improved outlook for FCF pre-M&A to EUR 375-425 million. This confidence is underpinned by sustained revenue growth, driven by the immunoglobulin franchise globally, and continued traction for subcutaneous IG. Improved performance in albumin (following Q1 2025 license renewal in China) and Alpha-1 (benefiting from a new specialty pharmacy partnership in the U.S.) are also key assumptions.

For the full year 2024, the company expects a significant revenue surge in the second half, with growth accelerating to 10-12% at constant currency. Adjusted EBITDA is projected to reach over EUR 1,800 million, implying a 27-28% margin (excluding Biotest), driven by increased revenues, an improving product mix, lower cost of goods, and operational leverage. The leverage ratio is targeted to be around 4.5x by the end of 2024, supported by the Shanghai RAAS divestiture proceeds and organic improvements.

Risks and Challenges

Despite the positive momentum, Grifols faces several risks. Potential trade tariffs on certain products are a concern, though the company's vertically integrated and locally operated business model is designed to mitigate this impact. Regulatory changes in U.S. drug pricing, such as the reintroduction of a "most favored nation" policy and the One Big Beautiful Bill Act, could affect sales prices. Management believes plasma-derived therapies' unique cost structure and closer global price points may lead to exclusions or less significant impacts, but remains vigilant.

The recent depreciation of the U.S. dollar presents a headwind to reported revenue and EBITDA in H2 2025, although its impact on Group Profit, leverage, and FCF pre-M&A is expected to be broadly neutral due to natural hedges within the business model. Transfer pricing matters and OECD Pillar 2 reforms also pose compliance and potential tax liabilities, but Grifols' robust position and effective tax rates above 15% in most territories are expected to limit significant economic impact. The company has also faced "unwarranted attacks by an opportunistic short seller," which management has refuted, with financials and accounting practices confirmed by regulators and auditors.

Conclusion

Grifols is demonstrating a compelling turnaround story, transforming operational efficiencies and strengthening its financial foundation. The company's deep-rooted expertise in plasma-derived medicines, coupled with strategic investments in technology and a resilient global footprint, underpins its ability to deliver sustained growth. The impressive H1 2025 financial results, marked by robust revenue and EBITDA expansion, alongside significant progress in deleveraging, validate the effectiveness of its Value Creation Plan.

With a clear strategic roadmap, a strong innovation pipeline, and a proactive approach to competitive and regulatory challenges, Grifols is well-positioned to capitalize on the growing demand for plasma-derived therapies. The reaffirmed 2025 guidance and the improved FCF outlook reflect management's confidence in translating operational excellence and technological leadership into enhanced shareholder value, making Grifols an intriguing prospect for discerning investors.