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Cosmos Holdiings Inc: THE INVESTMENT CASE

Cosmos Holdings focuses on Europe as it expands its global wholesale pharmaceutical business

Cosmos is a modern company, but the trade routes it relies on are ancient
Vial of pills
INVESTMENT OVERVIEW: COSM The Big Picture
The way Cosmos operates in Europe is by arbitraging and profiting from price differences in brand-name drugs

It seems fitting that Cosmos Holdings Inc.(OTCMKTS:COSM), a Chicago-based pharmaceutical holding company, would have a subsidiary in Greece, which is one of the largest exporters in the European pharmaceutical parallel trade.

Cosmos is a modern company, but the trade routes it relies on are ancient, and in a way that the ancient Greeks might approve of it is building an empire in the pharma sector that extends from the Byzantine port city of Thessaloniki all the way through to Scandinavia.

The way Cosmos operates in the parallel trade market – which allows for the free movement of goods across Europe from lower value to higher value markets – is by arbitraging and profiting from price differences in brand-name drugs, which might cost less in Greece than they do in, say, Germany.

“We purchase as much in the way of excess-branded pharmaceuticals products as we can,” says Konstantinos Vassilopoulos, the U.S. finance manager of Cosmos, who is based in Chicago. “And we export those products to wholesalers throughout Europe.”

When considering Cosmos, one must glance first at its meteoric growth. When Cosmos began trading in the European parallel pharmaceutical market in the fourth quarter of 2015, it reported just US$533,000 in annual revenue and was only doing business in Germany, the UK, Greece and Poland. By last year, its yearly revenue figure was more than 56 times higher at US$30mln and the company was engaged in the wholesale pharma trade across Sweden, Jordan, the Netherlands, the United Arab Emirates and 12 other countries, and showing a gross profit of US$1.96mln.

Building a European-wide network

Cosmos’s first stop on its trading route is northern Europe. Keen to ramp up its presence in Germany, Cosmos’s management team is in discussions to acquire a German-based wholesaler that specializes in re-importing pharmaceuticals from other European Union countries. The motivation behind this proposed takeover is that Germany is the European country where drugs are most in demand since it is Europe’s largest economy and the country’s legislation favors the parallel importation of pharmaceutical products.

“Germany absorbs approximately 50% of the excess branded pharmaceuticals in the European pharmaceutical market. It’s the largest pharmaceutical parallel importer of products,” explains Vassilopoulos. “Quite a few synergies will come out of this German acquisition. We hope to have news concerning the acquisition within the next few months. We’re still in negotiations.”

Deal with Canadian marijuana company Marathon Global

The German acquisition is not Cosmos’s only recent advance in Europe. The group revealed just weeks ago that it would do a deal to distribute the Canadian cannabis supplier Marathon Global Inc.’s line of medical marijuana products across the EU.

The deal with the German wholesaler is still being ironed out and Europe’s medical marijuana market is still taking shape, but that is not much of a worry for Cosmos as it already boasts a wide network of clients looking to buy and sell pharmaceuticals across Europe.

The engine behind Cosmos Holdings

Indeed, Cosmos controls two businesses that are intertwined to support its growth. The first is Sky Pharm, a Thessaloniki-based company, which trades the excess amounts of as many as 500 medicines across Europe.

The second is Decahedron Ltd, a UK-based pharmaceutical wholesaler, which is also involved in the importing and exporting of drugs and medical devices across much of northern Europe as well as in the United Arab Emirates and Singapore.

Grigorios Siokas, Cosmos’s chief executive also owns Doc Pharma, a maker of food and vitamin supplements, which is headquartered in Thessaloniki. “Grigorios owns Doc Pharma and is leveraging its capabilities to help Cosmos enter into the Nutraceutical sector, he hopes to roll up his company into Cosmos when the time is right,” explains Vassilopoulos.

Push into dietary and natural food supplements

By selling Doc Pharma contract-manufactured dietary and natural food supplements, Cosmos is also taking steps to widen its repertoire beyond pharmaceuticals. With dietary supplements offering very attractive gross margins, management is bullish on rolling out of their own product line of supplements.

“Wholesale branded pharmaceutical products are the key revenue generators for the company,” says Vassilopoulos. “We will begin to add food supplements and other products to our distribution network in the coming quarters.”

Looking to the United States

Attention is now being focused on Europe, but the hope is that Cosmos’s reach will at some point extend to the U.S. This is why its management chooses to keep its headquarters in Chicago, despite Chief Executive Grigorios Siokas living in and conducting most of Cosmos’s business from Greece.

Going forward, the plan is for Cosmos’s management team to find acquisition targets that will enable it to get its wholesale business off to an explosive start in the US. The company will also look to sell its own nutritional supplements directly to US stores and expects to have a toe-hold in the US by early next year.

“We are keeping our eyes open for acquisitions in the US,” concludes Vassilopoulus. “We expect to enter the U.S. market in the near future.”

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