Z
Zur Rose Group AG
SIX:ROSE
Zur Rose Group AG
SIX:ROSE
Price:
32.3 CHF
-5.56%
Updated:
May 2, 2024
Section:
Earnings Call Analysis
Summary
Q2-2023
Q2-2023
Company Targets Tripling Sales for 8% Margin
The company has a clear projection for growth and efficiency. To reach an 8% EBITDA margin, they need to triple their current sales. The operating income guidance is set at CHF2 to CHF3 million, down from CHF16 million influenced by special factors in the prior year. A significant development is the company's complaint to the EU Commission regarding the mandatory launch of eRX (electronic prescriptions) and related issues. The Commission's preliminary assessment is due in September, with a final decision, whether to proceed or close the complaint, expected within one year. This decision will shape the landscape for the company's offerings and their market within the pharmaceutical industry.
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Hello, ladies and gentlemen, and welcome to the DocMorris AG Conference Call regarding the 2023 Half Year Results. At this time, all participants have been placed on a listen-only mode. The floor will be opened for questions following the presentation. [Operator Instructions]
Let me now turn the floor over to your host Walter Hess.
Yeah. Thanks a lot, and good morning, everybody, and welcome to our conference call. We are pleased to inform you about our half year 2023 results and to give you an update on our business activities, as well as the exciting developments around eRx in Germany. Afterwards, we are looking forward to answering your questions. With me today are Madhu, our CTO, who will give an update on the expansion of the DocMorris Digital Health Ecosystem; and Marcel, our CFO, who will present the financial update and the outlook.
Since we communicated last time in March many positive and encouraging developments have taken place. Therefore, let me start with the key messages and the highlights of this year till today. First of all, we are on track on our path to profitable growth. We can confirm to have reached a revenue as well as the EBITDA target for the first half year.
With regard to revenue, we reached an inflection point at the end of Q1 and the EBITDA margin increased by 6.6 percentage points year-over-year. Regarding the milestones, we communicated already in May that the sale of the Swiss business has been successfully closed with total proceeds of about CHF360 million which brings us to an equity ratio of about 50% by mid of the year. In addition and in the meantime, we have successfully launched our long-tail marketplace in July.
Second, the most exciting news since our last conference in March are there many steps which has been taken around eRX in Germany. With the start of the nationwide rollout in July and the confirmation that most of the doctor and pharmacy systems, as well as the pharmacists, are eRX ready, already now. And even the KBV, the national physician association has started an information campaign stating that eRX is starting now and asks the doctors to use the time now to onboard and test eRX in order to be ready in January 2024.
And third, there will be a seamless digital eRX channel ready to use as of Q4 this year. More details, we will give you afterwards. And also very important was the fact that the eGK solution to redeem the eRX in local pharmacies has been delivered and launched on time on July 1, as this was the base for the nationwide rollout that started. And finally, we can just confirm again that we are fully ready and really excited about the start of the eRX rollout now.
We continuously expand our digital health ecosystem by enlarging the number of services and products. Our aim is to offer to our patients and customers the most customer-centric, convenient, and caring digital health ecosystem unimaginable. By adding features and services for medication in one click, in combination with next day delivery as standard and same day delivery for our acute demand, as well as the integration of tele doctor services, we offer to our patients and customers the unique eRX and chronic care experience.
The full range of OTC and beauty personal care products at attractive prices and with state-of-the-art customer experience expands our health offering. The continuous improvement of the performance in operations and marketing brings us to a profitable OTC and B2C business. To complete the fulfillment of the demand and wishes of our patients and customers, we will add incremental to the already existing -- sorry, already existing marketplace for same day coverage with more than 200 pharmacy partners, more than 150 sellers with additional 50,000 SKUs of long tail assortments by end of this year.
Let me give you now a brief update on the recent eRX developments. The main message here is the eScript is starting. As you can see on the right-hand side, this claim doesn't come from us, but from an information campaign, the KBV. As of today, about 2.8 million eRX have been redeemed with a growth of 70% week-on-week since June this year. We also see a pleasing increase in the number of eScripts that we received. The regulatory framework for the mandatory launch in January will be defined a new Digital Law. It shall be approved by the German cabinet end of August and come into force by the end of this year.
Within this law, we are happy to see that the eRX will be the binding standard and therefore mandatory as of January 2024. There will be a close monitoring of physicians usage of eScripts [Technical Difficulty] technically ready. The patients will have the right to lower the level of data security for their identification when using the telematic infrastructure health services such as eRX, and the Health Minister Lauterbach very much underlined his will to bring eRX to life now by stating that it is not acceptable that we still have pay for prescriptions. We need arrays to catch up.
And most importantly, all stakeholders including doctors are already or are getting ready for eRX now. Even more so, it is important that we, as online pharmacy, has non-discriminatory accesses to the eRX tokens as well. The really good news is that there is an easy, convenient, and fully digital channel by combining NFC-capable eGK and smartphone ready for use. The process is similar and the data protection standards is equal to the use of the eGK in local pharmacies.
And already, today close to 90% of the eGKs and all Apple iOS and major Android-operated smartphones re NFC capable, and adding the local pharmacies, no separate pin number is required. There are close interactions with the relevant regulatory bodies and stakeholders with the target to bring the solution live in Q4 this year.
And with that, I would like to hand over now for a deeper insight on the progress of our digital health ecosystem to my colleague Madhu.
Thank you, Walter. As you can see from Walter's summary, we had a very productive and busy H1. Over the next couple of slides, let me go into a few more details. As the CTO, it's a pretty bad form to not have a complicated architecture of slides, so this is kind of my answer to that one. But all kidding aside, if you look at this picture, I shared this in March of this year during the yearly conference and we have it updated for H1.
Our vision of journey to help in one click continues to be our North Star. To continue on this path, we focus on three essential elements; experience on the top, product in the middle, and operations and innovation on the bottom. On each of these, we've been making steady progress over the past years, but much more acceleration in H1 of this year. More recently, we focused on the care experience to improve, especially in the checkout and the shopping cart area and also new patient services that I'll cover in the next slide and on medication management.
On the product and, as Walter already mentioned, we significantly increased our assortment with a variety of categories and the marketplace now allows our customers to buy our products directly from DocMorris or from our partners through the same DocMorris ecosystem. On the operations and the back office front, working closely with my friend Kaspar, Head of Operations, we have significantly improved the automation in our distribution centers, increasing the efficiency and getting ready to scale for eRX.
For a company of our size, having a strong foundation and a unified platform is key to scaling and growing, and the work that we did in H1 puts us on a very firm footing. In the near future, we will continue to bring on more chronic and patient services to enable the vision of health in one click on the top here.
Next slide. Our goal has always been to delight our customers and it's a very complicated task. But having platforms and architectures is cool, but having apps and websites as much much cooler, so let's as a product team talking to our customers is part of our DNA. And when we work in patient services, this is the primary dialog that we have with our customers. And what we hear back from them is very consistent. Medications, especially acute and chronic is a complex workflow.
Obviously, when you're taking a medication that you are used to it, it's easy. However, when you are either a new patient or you're starting a new medication or you're starting a new protocol, it's very intimidating. As a customer, what they want is to feel safe and confident. Number one. Number two, get key questions answered. And number three, to reduce the manual steps where possible using smartphones.
So with all of these insights what the DocMorris app includes now and bringing in near future, I will start from left to right, is making the eRX journey as in digital as possible. We're all very familiar with contactless. We all travel, hopefully many of you did during the summer and the boarding pass workflow that you see where you can use your smartphone to get access to the gate is a very simplistic way for us to look at contactless. And when you think about digital health, this is the barrier that we have to cross.
So the first part is making eRX an Rx, easy to redeem, using NFC and other technologies. Second, making medication history all in one place, so that you have peace of mind when you want to take further actions. Third is being able to use the notifications reminders that we are also used to on iPhones and Android phones and being very specific on how to adhere to a mitigation plan. Fourth is, we all hate repeat prescriptions and the steps that are necessary. How do we make that process as seamless as possible using digital.
And then finally, having the confidence that the pharmacist at DocMorris has my back and is always available to answer questions and so on. It's something that our customers love. So when I wrap all of these things into the DocMorris app, it gets us to the better digital experience that our customers are demanding us to do.
Next slide. So somebody much smarter than me wants that you are not a platform until the people who are building on your platform are actually making money. So when the rollout of the marketplace earlier this year, we're at that point where we have a marketplace running on our own platform. But the core interaction that our customers have with this platform is around the shopping cart. And we spent a considerable amount of energy this year in making that much better, better in the sense of being able to perform faster, have more options for payments, and be much more integrated into the experience itself.
So we'll continue to refine this experience with significant amount of data points that we collect and that will refine our approach towards this core interaction much more in the coming months. So, maybe I should talk a little bit more about data and science as a next segue. So data science and analytics are three terms that we use very often, but the trick is to make sure that they are a core ingredient of our agile teams and that's what we are very proud of. We have a stronger army of data scientists that spend their days understanding behavior and build models that improve that experience for our customers.
Recently in H1, we went to align with our DocMorris recommendation engine that Elmann is dead ends for a product searches and improves the complementary product visibility. And the data geek, though, the strength of our recommendation is always measured by how close the recommendation is to what the customer already knows they want and this is table stakes. We can get there easily. The part that we are much more proud of and is a differentiation for us is how can you predict what a customer might want and then show that recommendation. And this is the magic sauce that we have now where the might want is a key KPI that we measure and that we continuously improve product and cart list.
So in summary, the H1 has been a very busy time for our product science and tech teams as we bring new features to our customers. I'm looking forward to coming back in March with a few more cool features and deeper customer insights.
With that, let me turn it over to my friend Marcel to make finance and numbers a lot more interesting.
Thank you. Madhu. Good morning from my side. I will show you that our figures fully support the path to profitability and that our break-even program communicated in August '22 has been implemented and achieved. And very important, in several key figures we have already reached an inflection point to a profitable growth.
I'd like to start with the half yearly EBITDA improvement. As you can clearly see the path to profitability continues. We have improved EBITDA compared to H2 '21 by a very strong CHF76 million. You might notice that the numbers changed compared to our last update in March. To ensure continued comparability, we have restated the historical data to continuing operations and excluded our divested Swiss business.
To compensate for the EBITDA contribution of the pharma business, we needed to define additional initiatives. We identified incremental structural synergies of CHF5 million and a new area of profitability drivers will contribute more than CHF50 million to achieve breakeven. So far we are fully on track and have achieved our plans. Our biggest levers are the strong gross margin increase, the improvement of our marketing efficiency, and the reduction of complexity and costs with the major milestones of Medpex integration and the new distribution centers.
The last two months have been dominated by continuous efficiency gains such as reduction of cost per (ph) parcel , process optimization and improvement of customer experience. All based on the strong foundation of our tech platform as presented by Madhu, and target-oriented automation.
With the initiatives we already have implemented, we were also able to more than compensate for market headwinds such as material and wage inflation or global medication shortages. Given that we have already executed more than the savings that are visible in the figures, we are confident to deliver on the remaining improvement and to achieve break-even in 2024.
On Slide 15 we show that these measures lead to a year-on-year improvement in our adjusted EBITDA of CHF34 million, or a 6.6 percentage points margin increase. A very strong and important driver is the gross margin, which increased by 5.5 percentage points due to planned integration, selected price increases, and procurement optimization. The focus on profitable customers and the brand integrations led to a decline of consolidated revenues by 6.4% year-on-year, but compared to the previous half year, already to a growth rate of 6.2%.
Consolidated revenues are extraordinarily driven by the structural integration of Medpex. In comparison, external revenues declined 17.3% year-on-year in local currencies. Speaking to external revenues, we are pleased to report that we have reached an inflection point on our path to profitability. We have returned to quarterly goals.
The deep dive into the segments on Slide 16, shows a similar development. The break-even initiatives concentrate not only on Germany, even though this is of course, where the largest contributions generated, up on all areas of the company. In Germany, we are pleased with our OTC development, the paper prescription developments are behind our plan up. We expect the business to catch up in the second half of the year. In Europe, we have already largely eliminated the cash trend to CHF1 million.
Our KPI slide -- our KPIs on Slide 17 are calculated on 12 months basis. This means that the recent positive impacts are not yet fully reflected in all of these figures. The focus on sustainable customers with our exponential led again to a decline in the total number of active customers, mainly because reduced the number of one-time shoppers. I will come to that later.
We see the continuously positive development of the more earnings-oriented cases of -- like basket size, order frequency and repeat order rate, as proof that the strategy we have adopted is working. On site visits, we have already seen -- we are already seeing a trend reversal where we were able to switch back in growth mode.
On Slide 18, we provide our typical profit and loss statement. Essentially, we have two main drivers of the figures. Firstly, our break-even program resulted in an increase in the gross margin and a reduction in the line items, personnel, marketing, distribution and other operating expense. Secondly, the brand integration, especially Medpex, resulted in the financial insourcing of significant parts of the business into the scope of consolidation.
More specifically, this leads to one, an increase in consolidated revenue and that a reduction in the difference to external revenue. Two, a significant increase in the cost margin and three, an increase in personnel, marketing, and distribution expenses. Together, this leads to a comparable adjusted EBITDA of minus CHF20.8 million and an improvement to previous year of CHF34 million.
As a link to the balance sheet, on the next slide, you can see the positive impact of sales -- of the sale of the Swiss business of roughly CHF200 million in the net income from discontinued operations on the last line of the table.
In the balance sheet, we see the comparison between December '22, including the Swiss business and June '23 without. Let me explain some of the main changes. The cash position includes the initial proceeds of roughly CHF300 million for Swiss seg. On top, we have about CHF50 million receivables and current financial assets, which mainly comprises the earn out which will be paid in Q2 '24.
Immediately after the closing, we started the repurchase of outstanding bonds for debt optimization and interest rate reduction and realized savings of more than CHF10 million. The successful offer led to a repurchase below issue price of CHF109 million of the '24 straight bond and CHF31 million of the '25 convertible bond.
Yeah. In addition, after the reporting date in July, we fully paid back the '23 straight bond in the amount of CHF30 million and bought back another CHF22 million of the convertible '25. A lot of line items are also improved. For example, the operating net working capital from continuing operations could be significantly reduced by CHF20 million. Overall, we are very pleased with the massive strengthening of our balance sheet. Our equity ratio increased to close to 50% and secures the refinancing of the remaining debt position.
Let's move to the outlook. Before jumping into the guidance, we have an updated version of the quarterly development. The bars show indicative the quarterly absolute revenues divided into chronic and non-chronic. There are two key takeaways on this chart. One is the increase of the share of chronic revenues, which ensures a sustainable profitable growth development in the future based on the loyal customer cohorts. This is exactly what we have targeted with our strategy adoption.
Two is that we were able to go again in Q2 compared to Q1 by 2% and thus reached an inflection point, as shown by the yellow line. On a year-on-year development of our quarterly sales, we are improving and will return to growth in H2. We reiterate to our financial outlook. Nothing new here. We are pleased to confirm our short and mid-term guidance as released in March this year. For ease of interpretation, we have provided restated values of 2022 without Switzerland in orange boxes here.
With that, I would like to open the Q&A session. And we look forward to your questions.
[Operator Instructions] And question comes from Alexander Thiel, Jefferies. Please go ahead. Your line is open.
Hi, Alexander Thiel from Jefferies. Good morning, Walter, Marcel, and Madhu. My first question is related and the focuses on your digital eGK NFC solutions, which obviously would be a positive game changer for the waiting period until we have the fully digital solution with the EID. Could you explain, how your discussions are currently progressing and what needs to be done from the government [indiscernible] the market size to get this ready end of Q4 and then attached to that meaningful module, could you explain your strategy on how you want to convert different PC customers with a chronic disease to use your app for their [indiscernible] and what part of the follow-on prescription function play in that regard? Thank you. And then I have a second one.
Yeah. Okay. On the NFC capable-eGK, the solution basically is technically ready. It fulfills all requirements for services and components as well as data protection. And it's now just discussions that go on. This is alignment with the regulatory bodies and stakeholders. But basically the solution is here and could start almost immediately, if needed.
Sure. And let me answer the second part of your question. I think if I paraphrase it, how will the follow-up prescription is helping and how are we converting from different customer cohorts into the chronic side? So having done this a couple of times now and in any country where you have advanced digital health, the repeat prescriptions is one of the most often used mechanism as a Trojan Horse to increase the penetration of digital health. And we are doing the same thing here.
What we've done is try to reduce the number of steps that a customer has to take directly in order to get a follow-up prescription. So what we're trying to do is to automate some of those steps in collaboration with the customer with their consent, but also work with the doctors and the systems within the doctor offices to automate that process. And we've done this as a pilot and we have very good results on it and now we're expanding that into production.
The second part of your question around the conversion from non-cohort to other. This is an ongoing activity for us. And because we have such a long history with our chronic patients, we actually understand very well what their request is. But more importantly what their customer journey looks like. And this is the part that allows us to be very precise when we defined the chronic services and the patient services, which are now modeled into the app and more of them will be coming over the next several months as we kind of bring that all together.
Okay. Thank you. Maybe a follow-up for Walter. I mean it's technically ready, but what needs to happen, the (ph) market directed for data protection has that you need to see or it's been just saying this is allowed. What -- how should we think about that?
Basically, there is -- I would say nothing additional is necessary, but of course solution has just to be aligned. So everybody has really to understand and to align on it and that's basically what is going on at the moment. But as said, it's really the similar process. I think the local pharmacy, it's -- the similar data protection standards that this will feel. It's the similar requirements of that cohort. So for us, it is really a huge step forward and then the great development and will bring us in a good position, also for the start of the eRX in January '24, mandatory-wise, but also already with the ramp-up now in Q2 and Q4.
If I can add to that. I think on the technology side, Walter already covered in the slide earlier. 90% of the eGK cards today support this within Germany, which is a very substantially high number, just as a starting point. And then when you add on top of it, people are already used to NFC-type usage with their smartphones today, either in boarding pass and the airline or in a retail environment where you do contactless payments today. So NFC by itself, the technology is very, very mature, both on the Android and Apple platforms and more importantly, customers are very used to it. So from -- going from a retail or a travel experience into a digital health experience from a technology standpoint, there is no barrier as what I was saying and from an eGK card standpoint, because we starting from 90% as a starting point, there is less of a barrier. So I think a number of these things, I think combined together, give us the confidence that this is something that will be very beneficial for our customers in Germany.
My second one is on the eScript numbers and I know you cannot most likely give us an eRX number, but could you comment on the current uptick that you are currently seeking the higher number of eScripts in the system? And lastly, I just want to thank Daniel and the rest of the IR team for the clear improvement in financial disclosure and presentation. I think all analysts and investors, we appreciate the -- this step up. Thank you.
Yes. Thank you, Alex -- Alexander. Yes. The ramp-up, so as commented before, so week-over-week since June, it's a 70% ramp-up. We will -- we think it will grow significantly and then we will see a significant uptick until the end of this year in the ramp-up phase. It's really difficult to predict and we have just different scenarios for which we are prepared and, yeah, we watch everything very closely and take the actions necessary in the right moment.
Okay. Thank you.
And our next question comes from Chris Johnen, HSBC. Please go ahead.
Yes. Good morning, all. Thanks for the opportunity to ask questions. First, I'll be interested to get your views on the BGH, sort of news we've seen in the last couple of our days [Technical Difficulty] our expense, discounts versus bonuses, I'd be interested to hear also thinking about the lawsuit, just to pick your brain on that and see what do you make of that.
Yeah. Thank you for that question. We also follow it closely. There are some of these cases underway and BGH has forwarded to the new commission. So we follow it closely. We are checking it, but I cannot say more at the moment.
Okay. Then the second question coming back to Alexander's question earlier. If I understood you correctly in your sort of first part of the presentation, you said that you saw an increase in eRX that you receive. Is there any color you can give or sort of put it into perspective versus the overall trends in the market? And then a very small one, in terms of the functional currency, if I remember correctly, last time you said analyzing the topic if it made sense to change it. Just to see if there is anything new on that. Thanks.
So on the first question, of course, it's still a relatively small number, the percentage of eRX. What we see is just promising as the share of eRX what we see with us is already above the share of eRX. And the second question, could you repeat it, please?
For me, about the functional currency. There are no news since March. We have analyzed and there is no pressure to do something immediately, but it -- on our roadmap and monitoring and -- will be a topic later part in time.
Okay. Understood. Thank you very much.
The next question comes from Jan Koch, Deutsche Bank. Please go ahead.
All right. Thanks for taking my questions. I also have two, please. My first question is on repeat prescriptions. Do you have any insight to when the reimbursement rates of repeat prescription might be changed, given the doctors currently do not really have an incentive to issue those?
So far the e-prescription, what we can say is that it's already technically available and it's basically in place. And what we see in the market more compensation issues, issue for the doctors, then a technical or a process issue. So it could already be used now with eRX and we are just waiting until there are improvements on the physician side.
Great. And thanks for providing your thoughts on the revenue growth for Q3 and Q4. But do you also expect the number of active customers to increase again in Q3?
We do not guide on the number of customers on this KPI.
Okay. Understood. Thanks.
The next question comes from Olivier Calvet, Credit Suisse.
Yeah. Hi. Good morning, all. Thanks for taking my questions. I have a few. Let us take one-by-one if it's okay. Just a follow-up on eGK. You mentioned Q4 as a target for this NFC eGK solution. I just wanted to clarify, is this your target? Is this Gematik's target? Just the Ministry's target? Just wanted to clarify that..
Yeah. It's -- technically, it is already ready now. So the tests have been done. It's into production. It's basically -- it's our target, of course, but it's also very realistically that it's there in Q4 this year.
Okay. I was just wondering just almost a philosophical question here. But why is it so critical? I mean, a couple of years ago at the CMD you had -- you were showing the capability to scan tokens which are apps -- on the printout of the eScript. So I was just wondering why the eGK capabilities are critical. Is it because in practice, you see doctors tend not to print the eScript, and just some color there would be useful.
Sure. So, Olivier, let me start with an analogy and maybe I'll ask you a question actually. So when you travel today, how many times do you print your boarding pass versus take the boarding pass on your phone? Just give me your best guess.
Yeah. I mean you know the answer. You can answer for yourself.
Exactly. So that is the exact reason why we think that the eGK through NFC is a much, much better answer than getting a printout and walking into the local pharmacy or any kind of a workflow that has a manual step or a paper. We shouldn't even call it digital, right? So for us the NFC eGK allows us to bypass that whole process of adding a step and paper and printing and all of this stuff, and goes directly to everything that we carry all the time including into the restaurants, is your phone. So why not use the phone to trigger that transaction with the patients -- with the customer and use eGK NFC which we all know works very well in terms of contactless, either on Android or Apple, and make it as simple as possible.
Okay.
Sorry, didn't want to put you on the spot, but just wanted to give an analogy there.
No. Sure. Yeah. That makes sense. Yeah. And then just on prices. I was just wondering if you're seeing in non-prescription a return to more competitive discount levels in the second quarter or over the summer since the easing of -- in promotional activity we've seen overall since early '22.
No, we haven't seen any change. It's the normal development and competition.
And then just in terms of the cash flow or was there something else? No. Yes, so on the cash flow, I was just wondering about your pecking order in terms of funding the cash burn you have until you break-even at free cash flow level and so. I think, if I remember correctly, you were mentioning this -- the sale and leaseback of the H2 which I think you were talking about something in the order of magnitude of CHF30 million, is what you're aiming for. But beyond that what would you be looking to do straight or convertible bond or an equity raise? It would be interesting. Thanks.
Looking into -- in our balance sheet, which is now very strong and up to 50% equity ratio, the financing topic is the usual ongoing on daily business. And as you mentioned we have now classified the equity -- real like -- the leaseback held for sale. So there we started the process to sell it because that makes sense for us to own the distribution center of -- for the Swiss business, which we have sold and they are out of that topics as I explained also the earn-out which will be paid in Q2 2024 and so we are monitoring all the options, and as I said, at the daily business.
Could you remind us of the cash inflows you expect from the earn out?
The earn-out is defined as -- up to CHF47 million and depends on the EBITDA achievement of the business in 2023.
Okay. Thanks.
The next question comes from Gian Marco Werro, Zurcher Bank.
Good day, everyone. Two questions from my side, please. So first one is just on your other operating income. As I understand, usually they came from partnerships and also rental income with third parties. I expect most of it also relates to the Swiss business. However, the number today for the first half of the year, it's CHF1 million, was relatively low. So do we need to expect now a run rate of CHF2 million to CHF3 million going forward from this line item? That's just the first question.
Second question is again about the complaint to the EU Commission that you just handed in -- with those three legs. First of all, the digital redemption and on the other side, the mandatory introduction of the electronic prescription and also the lifting of the bonus ban. Can you give us a bit, your view or would you expect now as an answer from the EU Commission on those three complaints, and also by when do you expect an answer? Thank you.
Let me take your first question, the easy one. Yes. CHF2 million to CHF3 million for the moment is a good assumption. And you refer to a comparison to previous year, I think we had CHF16 million, thereabout the next time where we had an impact of valuation of earn-out output in sales included. So as I said, CHF2 million to CHF3 million is a good assumption.
And on the second question, we put this complaint for the simple reason that the EU commission stopped, [indiscernible] against Germany with the explanation that was, during COVID that the pharmacists have to focus now on caring about the people and that there will be mandatory introduction of eRX with non-discriminatory access of all pharmacies as of 1st of January 2022.
So I'd say, COVID is over. So there is no need any more to focus on that part. And as we all know, the mandatory launch of eRX has not started yet and then it's almost more than one year and a half ago and -- yeah, and therefore -- and the non-discriminatory access has not been given the moment we have filed a complaint and that's why we went back to the EU Commission and asked for that and it was linked to Rx bonus, Rx bonus banned, with these conditions. And this is how we said the whole thing now. So the EU Commission will do a preliminary assessment now which is due in September and within the latest one year, the Commission will decide whether to take steps towards proceedings or to close the complaints. And yeah, we will see how this process will go.
Thank you.
The next question comes from Sebastian Vogel, UBS.
Good morning. I've got three questions. I would ask them one by one. The first one is on the Digital Law From your point of view, do you see there is also some penalties included for doctors not complying and not going ahead on the eRX side or is it also still not included?
Yeah. I think, that in the draft of the Digital Law, this is defined that doctors or physicians who won't be ready technically one month after the eRX has become mandatory, there will be a reduction of 1% of the income that you get from the insurance companies. So this is what is defined at the moment in the law and we will see what will pass through the cabinet end of this month.
Understood. Many thanks. My next question would be, in June there was a roundtable on eRX and there was also, it seems like one of the key product managers for eRX from the Gematik, and he had been also asked about like what he expects in terms of market share that eRX will have by the end of 2024 and he was just saying that he is expecting 50%. So how would you square that with the mandatory use by 1st of January if the main guy from Gematik is expecting even then 12 months later, it will be just 50% pickup there.
Yeah. It's difficult to predict and give you a figure right now. But what I can say is, it will become mandatory and maybe a good comparison -- the electronic seek note which became mandatory 1st of January this year and meanwhile, more than 80% of the seek notes are electronically. So maybe that helps as an indication.
Many thanks. I understood that. The last question is with regards to your EBITDA break-even or adjusted EBITDA break-even target that route planning on the slides. If I assume the eRX is rolling out in the way like you have budgeted it, what sort of spending level we would see then in the -- on the adjusted or adjustment bucket, so to say.
Yeah. As I always said, it's -- we are working here in scenarios about the ramp-up of electronic prescription and also in terms of marketing, we are very flexible and prepared to do more or less through exactly to do what is needed. And that's why we have, let's say, that the break-even is excluding the positive or negative impact of electronic prescription and we will achieve it on our base business on OTC.
So, if I may follow-up, so in that sense, if the eRX is rolling out like it is in your base case, just in, you of course, have there. Would it mean that then the marketing spending would go back to the sort of level that we have seen by the last time when you were expecting that the eRX rollout will be happening?
No. We do not see this dimension of marketing campaign at the moment.
Many thanks. I have no more questions then.
The last question that we have time to take at this point comes from Urs Kunz, Research Partners. Please go ahead.
Yes. Good morning. I have just a follow-up question on the question from Sebastian about the EBITDA breakeven in '24. I mean, in what kind of scenario regarding Rx development, would you get into a negative EBITDA, when -- I mean, how fast does it drive that something like that could happen.
I would say the only scenario is when we do huge marketing campaign. And no, eRX will end up with us. So -- and this we do not see very plausible. What we see at the moment is that we have a very high marketing efficiency and we also have our existing customer base, very sustainable, loyal customer base with upside potential to sales in prescription drugs. So yeah. that was scenarios. But we are very excited about the actual development and the indications of increasing electronic prescription.
And maybe one last question about the mid-term part of this 8% EBITDA margin, I mean, earlier times you gave kind of a sales volume, you have to have for that. Can you tell us from now what kind of sales you need to have for an 8% EBITDA margin?
Yeah. It's been in the mid-term guidance. And as you said, we stopped to give guidance on an absolute sales number, because it really depends on the categories and the stocks of sales. But just to give you a high-level number, it's about a tripling of our actual sales that is needed to achieve this 8% margin.
Thanks a lot.
So thank you very much. There are no more questions. I'd like to hand back to the speakers for some closing remarks.
Yeah. So thanks a lot from our side, from our team. I said at the beginning, really interesting and exciting developments going on and we are very close to it. We are really close to all the regulatory bodies. We are close to the patients, to the customers, and we'll do, the whole team, everything to make it successful and to bring this profitable growth in the future as guided in our mid-term guidance. Thanks a lot for your time, for your attention, and have a good day.
The conference is no longer being recorded.