Stock Analysis & Valuation PolyPeptide Group AG (0AAJ.L)

• Previous Close: £27.30
• Sector Valuation Confidence Level: High

Valuation method	Value, £	Upside, %
Artificial intelligence (AI)	20.60	-25
Intrinsic value (DCF)	8.51	-69
Graham-Dodd Method	6.90	-75
Graham Formula		n/a

Strategic Investment Analysis

Company Overview

PolyPeptide Group AG is a leading contract development and manufacturing organization (CDMO) specializing in GMP-grade peptides for pharmaceutical, biotech, and veterinary applications. Headquartered in Zug, Switzerland, the company provides critical peptide-based solutions, including custom research-grade peptides, neoantigen peptides for personalized cancer therapies, and peptide-based generics. With a strong presence in both human and veterinary markets, PolyPeptide also serves the cosmetic industry with specialized peptides. Founded in 1952 and now a subsidiary of Draupnir Holding B.V., the company supports clients from early-stage development to commercialization, offering regulatory affairs expertise. Operating globally, PolyPeptide plays a vital role in the biotechnology and healthcare sectors, catering to approved therapeutics, clinical-stage drugs, and generic formulations. Its expertise in peptide manufacturing positions it as a key player in an industry where precision and regulatory compliance are paramount.

Investment Summary

PolyPeptide Group AG presents a mixed investment profile. The company operates in a high-growth niche within the biotechnology sector, benefiting from increasing demand for peptide-based therapeutics and generics. However, its recent financials show a net loss of CHF 19.6 million and negative EPS, raising concerns about profitability. Positive operating cash flow (CHF 89.4 million) suggests operational efficiency, but significant capital expenditures (CHF 85.8 million) indicate ongoing investments in capacity. The company’s beta of 1.076 suggests moderate volatility relative to the market. Investors should weigh its strong industry positioning against financial performance risks, particularly in a competitive CDMO landscape.

Competitive Analysis

PolyPeptide Group AG holds a competitive edge in the specialized peptide CDMO market, leveraging decades of expertise in GMP-grade peptide manufacturing. Its ability to support both proprietary and generic peptides across therapeutic areas, including oncology, gives it a diversified revenue base. The company’s focus on regulatory compliance and end-to-end services (from development to commercialization) strengthens client retention. However, competition is intensifying as larger CDMOs expand into peptides and biotech firms vertically integrate. PolyPeptide’s mid-size scale may limit its ability to compete on cost with giants like Lonza, while smaller niche players could challenge its agility. Its Swiss base ensures high-quality standards but may increase operational costs compared to Asian competitors. The company’s recent losses suggest potential inefficiencies or pricing pressures, though its strong cash flow indicates underlying operational resilience. Strategic partnerships, such as its Draupnir Holding backing, could provide stability, but execution risks remain in scaling high-margin segments like neoantigen therapies.

Major Competitors

• Lonza Group AG (LONN.SW): Lonza is a global CDMO leader with extensive peptide and biologics capabilities, offering larger-scale production and broader service breadth than PolyPeptide. Its stronger financials (profitability and scale) give it an edge in bidding for big pharma contracts. However, Lonza’s diversified focus (beyond peptides) may dilute its specialization, where PolyPeptide excels. Higher pricing due to Swiss operations is a shared challenge.
• Cambrex Corporation (CAMB.L): Cambrex is a key CDMO competitor with strong small-molecule and API expertise, increasingly expanding into peptides. Its US/EU footprint provides geographic diversification, but it lacks PolyPeptide’s deep peptide-specific legacy. Cambrex’s profitability and scale are strengths, though its peptide segment is less differentiated.
• Sanofi SA (SNY.PA): Sanofi’s in-house peptide manufacturing (e.g., for insulin analogs) competes indirectly with PolyPeptide’s CDMO model. Sanofi’s vertical integration and R&D resources pose a threat, but its focus on proprietary drugs limits direct competition in the contract services space where PolyPeptide operates.
• Bachem Holding AG (BAC): Bachem is a pure-play peptide CDMO and a direct rival to PolyPeptide, with similar Swiss quality standards. Bachem’s stronger profitability and larger market cap suggest better execution, but PolyPeptide’s neoantigen and generics focus offers differentiation. Both face cost pressures from Asian competitors.