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 the revenue as well as the EBITDA targets of the first half year.
With regard to revenue, we reached an inflection point at the end of Q1. At the EBITDA margin, we 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 CHF 360 million, which brings us to an equity ratio of about 50% by mid of the year. In addition, 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 the many steps which have been taken around eRx in Germany. With the start of the nationwide rollout in July, the confirmation that most of the doctor and pharmacy systems, as well as the pharmacists, are eRx-ready already now.
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. Third, there will be a seamless Digital eRx channel ready to use as of Q4 this year. More details we will give you afterwards. 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 1st, as this was the base for the nationwide rollout that started. 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 in a imaginable. By adding features and services for medication in one click, in combination with next-day delivery as standard and same-day delivery for acute demand, as well as the integration of teledoctor services, we offer to our patients and customers a unique eRx and chronic care experience. A 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 BTC business.
To complete the fulfillment of the demand and wishes of our patients and customers, we will add incremental to the 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 e-script is starting. As you can see on the right-hand side, this claim does not 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-over-week since June this year. We also see a pleasing increase in the number of e-scripts that we received.
The regulatory framework for the mandatory launch in January, will be defined in a new Digital Act. It shall be approved by the German cabinet, end of August, and come into force by 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 e-scripts. Technically ready. The patients will have the right to lower the level of data security for their identification when using the telematics infrastructure health services, such as eRx. 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 paper prescriptions. We need a race to catch up.
Most importantly, all stakeholders, including doctors, are ready or are getting ready for eRx now. Even more so, it is important that we, as online pharmacy, have 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 standard is equal to the use of the eGK in local pharmacies. Already today, close to 90% of the eGKs and all Apple iOS and major Android-operated smartphones are NFC-capable. As in the local pharmacy, 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.
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 a CTO, it's pretty bad form to not have a complicated architecture slide, so this is kind of my answer to that one. 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 health in 1 click continues to be our North Star. To continue on this path, we focus on 3 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 with 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 around medication management. On the product end, 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 our size, having a strong foundation and a unified platform is key to scaling and growing. The work that we did in H1 puts us on a very firm footing. In the near future, we'll 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. It's a very complicated task. Having platforms and architectures is cool, but having apps and websites is much, much cooler. As a product team, talking to our customers is part of our DNA. When we work in patient services, this is the primary dialogue that we have with our customers. 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 and you're used to it, it's easy. However, when you're 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 1. Number 2, get key questions answered. To reduce the manual steps where possible using smartphones. With all of these insights, what the DocMorris app includes now and in the very near future, I'll go start from left to right, is making the eRx journey as digital as possible. We're all very familiar with contactless. We all travel. Hopefully, many of you did during the summer.
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. When you think about digital health, this is the barrier that we have to cross. The first part is making eRx and 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 and reminders that we're also used to on the iPhones and Android phones, and be very specific on how to adhere to a medication 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?
Then finally, having the confidence that the pharmacist at DocMorris has my back, and is always available to answer questions and so on, is something that our customers love. 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. Somebody much smarter than me once said, "You're not a platform until the people who are building on your platform are actually making money." With the rollout of the marketplace earlier this year, we're at that point where we have a marketplace running on our own platform. The core interaction that our customers have with this platform is around the shopping cart.
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. 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. Maybe I should talk a little bit more about data and science as the next segue. Data, science, and analytics are three terms that we use very often, but the trick is to make sure that they're a core ingredient of our agile teams, and that's what we are very proud of. We have a strong 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 live with our DocMorris recommendation engine that eliminates dead ends for our product searches and improves the complementary product visibility. As a data geek, though, the strength of a recommendation is always measured by how close the recommendation is to what the customer already knows they want. 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? 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 for our customers. 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 possibility, and that our break-even plan, communicated in August, August 2022, has been implemented and achieved. Very important, in several key figures, we have already reached an inflection point towards profitable growth. I'd like to start with the half-yearly EBITDA improvements. As you can clearly see, the path to profitability continues. We have improved EBITDA compared to H2 2021, by a very strong chf 76 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 this former business, we needed to define additional initiatives.
We identified incremental structural synergies of CHF 5 million. A new area of profitability drivers will contribute more than CHF 15 million to achieve break even. 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 center. The last two months have been dominated by continuous efficiency gains, such as reduction of cost per 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 improvements 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 CHF 34 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 brand 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 growth. 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 contribution is generated, but on all areas of the company. In Germany, we are pleased with our OTC development. The paper prescription developments are behind our plan, but we expect the business to catch up in the second half of the year. In Europe, we have already largely eliminated the cash drain to EUR 1 million. Our KPIs on Slide 17 are calculated on a 12-month basis.
This means that the recent positive impacts are not yet fully reflected in all of these figures. The focus on sustainable customers with Rx potential led again to a decline in the total number of active customers, mainly because we reduced the number of one-time shoppers. I will come to that later. We see the continuously positive development of the more earnings-oriented key figures, like basket size, order frequency, and repeat order rate, as proof that the strategy we have adopted is working. On site visits, 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 expenses. 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 thus a reduction in the difference to external revenue. Two, a significant increase in the cost margin. Three, an increase in personnel, marketing, and distribution expenses. Together, this leads to a comparable Adjusted EBITDA of CHF - 20.8 million and an improvement to previous year of CHF 34 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 CHF 200 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 2022, including the Swiss business, and June 2023, without. Let me explain some of the main changes. The cash position includes the initial proceeds of roughly CHF 300 million from Swiss sale. On top, we have about CHF 50 million receivables in current financial assets, which mainly comprises the earn-out, which will be paid in Q2 2024. Immediately after the closing, we started the repurchase of outstanding bonds for debt optimization and interest rate reduction, and realized savings of more than CHF 10 million .
The successful offer led to a repurchase below issue price of CHF 109 million of the 2024 straight bond and CHF 31 million of the 2025 convertible bond. In addition, after the reporting date in July, we fully paid back the 2023 straight bonds in the amount of CHF 30 million and bought back another CHF 22 million of the convertible 2025. Several other line items are also improved. For example, the operating net working capital from continuing operations could be significantly reduced by CHF 20 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 positions. Let's move to the outlook. Before jumping into the guidance, we have an updated version of the quarterly development.
The bars shows indicative that quarterly absolute revenues divided into chronic and non-chronic.
We have 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 loyal customer cohorts. This is exactly what we have targeted with our strategy adoption. Two is that we were able to grow again in Q2 compared to Q1 by 2%, and thus reached an inflection point, as shown by the yellow line. On year-on-year development of our quarterly sales, we are improving and will return to growth in H2. This leads me to our financial outlook. Nothing new here. We are pleased to confirm and our short and midterm guidance as released in March this year. For ease of interpretation, we have provided the restated values for 2022 without Switzerland in the orange boxes here.
With that, I would like to open the Q&A session, and we look forward to your questions.
Ladies and gentlemen, let me repeat. If you would like to ask a question now, please press 9, followed by the star key on your telephone keypad only once. If you wish to cancel that question, please press 9, followed by the star key a second time. The first 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 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 to us how your discussions are currently progressing and what needs to be done from a government slash Gematik side to get this ready as of Q4? Attached to that, maybe for Madhu, could you explain your strategy on how you want to convert your existing OTC customers with a chronic disease to use your apps for their chronic supply? What part does the follow-on prescription function play in that regard? Thank you. I have a second one.
Yeah. Okay. On the NF, NFC capable eGK, the solution basically is technically ready. It fulfills all requirements for services and components as well as data protection. It's now just the discussions that go on. This is alignment with the regulatory bodies and stakeholders. Basically, the solution is here and could start almost immediately, if, if needed.
Sure. Let me answer the second part of the question. I think if I paraphrase it, how is the follow-up prescriptions helping and how are we converting from different customer cohorts into the chronic side? Having done this 2 times now, in any country where you have a 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. 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.
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. 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 one cohort to the other, this is an ongoing activity for us. 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.
This is the part that allows us to be very precise when we define 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, for Walter. I mean, it's, it's technically ready, but what needs to happen? Is it the Gematik directive or data protection pass that you need to see or the Gematik just saying this is allowed? What- how do you think about that?
Yeah, basically, there is, I would say nothing additional is necessary, but of course, solution has just to be aligned, so everybody has really to know it, to understand and to align on it. That's basically what is going on at the moment. As said, it's really the similar process and as in the local pharmacy, it's the similar data protection standards that this fulfill. It's the similar requirements that are covered. For us, it is really a huge step forward and a great development, and will bring us in a good position also for the start of the Rx in January 2024, mandatory wise, but also already with the ramp-up now
...to a Q4.
If I can add to it, 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. Then when you add on top of it, people are already used to NFC type usage with their smartphones today, either in boarding pass, in the airline or in a retail environment where you do contactless payments today. 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. From going from a retail or a, or a travel experience into a digital health experience, from a technology standpoint, there is no barrier, as, as Walter was saying.
From an eGK card standpoint, because we are starting from 90% as a starting point, there is less of a barrier. 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, on e-script numbers. I know you cannot most likely give us an eRx number. Could you comment on the current uptake that you are currently seeing a higher number of e-scripts in the system? Lastly, I just want to thank Daniel and the rest of the IR team for the clear improvement of financial disclosure and presentation. I think all analysts and investors really appreciate this step up. Thank you.
Yeah. Thank you, Alexandru. Yes, the ramp up. As commented before, so week over weeks, since June, it's a 70% ramp up. We think it will grow significantly, and then we will see a significant uptake 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. Yeah, we watch everything very closely and take the actions necessary in the right moment.
Okay. Thank you.
The 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 Bundesgerichtshof sort of news we've seen in the last couple of days regarding Rx bonus discounts versus bonuses. I'd be interested to hear also, thinking about the lawsuit, just to pick your brain on that and see what you, what you make of that.
Yeah. Thank you for that question. We also follow it closely. There are some of these cases underway, Bundesgerichtshof has forwarded it to the new commission. We follow it closely. We are checking it, but I cannot say more at the moment.
Okay. The second question, coming back to Alexandru'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 received. Is there, is there any color you can give or sort of put it into perspective versus the overall trends in the market? A very small one in terms of the functional currency. If I remember correctly, last time you said analyzing the topic, if, if, if it made sense to change it. Yeah, just to see if there is anything you want to... Thanks.
On, on the first question, of course, it's still a relatively small number, the, the percentage of, of eRx. What we see is, is just promising as the share of eRx. What we see in, in, with us is already above the share of Rx. 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's on our roadmap and monitoring, and will be a topic later point in time.
Okay, understood. Thank you very much.
The next question comes from Jan Koch, Deutsche Bank. Please go ahead.
Hi, thanks for taking my questions. I also have two, please. My first question is on repeat prescriptions. Do you have any insights to when the reimbursement rates of repeat prescription might be changed, given that doctors currently do not really have an incentive to, to issue those?
For the e-prescription, what we can say is that it's already technically available and it's basically in place. What, what we see in the market is more a compensation issues, issue for the doctors than a technical or a process issue. It could already be used now with eRx, and we are just waiting until there are improvements on the physician side.
Yep. Great. 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, 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'll have a few, you know, that I take one by one, if it's okay. Just a follow-up on the eGK, you know, you, you, you mentioned Q4 as a target for this NFC eGK solution. I just wanted to clarify, is this your target? Is this the Gematik target? Is this the ministry's target? Just wanted to clarify that.
Yeah, it, technically, it is already, ready now, so the tests have been done, it's in the production. It's, it's basically, it, it's our target, of course.
Yeah.
It's also, yeah, very realistically that, that it's there in Q4 this year.
Okay. Then I was just wondering, just almost a philosophical question here, but why is this so critical? I mean, a couple of years ago at the CMD, you had-- you, you were showing the capability to scan tokens with your app, you know, on the, the, the printout of the e-script. I, I was just wondering, you know, why the eGK capabilities are critical. Is it because in practice, you see doctors, you know, tend not to print the e-script? Just some color there would be useful.
Sure. Olivier, let me start with an analogy, and maybe I'll ask you a question, actually. When you travel today, how many times do you print your boarding pass versus take the boarding pass on your phone?
Yeah.
Give me your best guess.
Yeah. I mean, you, you know the answer. You can answer for yourself.
Exactly. Right, exactly. That is the exact reason why we think that the eGK to 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? 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 restroom, is your phone. Why not use the phone to trigger that transaction with the patient, 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, I didn't mean to put you on the spot, but just wanted to give an analogy here.
No, sure. Yeah, that makes sense. Yeah, and then just on, 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, since the easing of in promotional activity we've seen overall since early 2022?
No, we haven't seen any change. It's the normal, normal development and competition.
Then just in terms of the cash flow, was there something else? No? Yeah. On the cash flow, I was just wondering, you know, about your, your picking order in terms of funding the cash burn you have until you break even at free cash flow level. You know, I think, if I remember correctly, you were mentioning this, the sale and lease back of the HQ, which I, I think you were talking about something in the order of magnitude of CHF 30 million is what you're aiming for. Beyond that, you know, what, what would you be looking to to do, you know, 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, the financing topic is a usual ongoing one, daily business. As you mentioned, we have now classified the Swiss equity real estate held for sale. There we started the process to sell it because it does not make sense for us to own the distribution center for the Swiss business, which we have sold. There are other debt topics. There are, as I explained, also the earn-out, which will be paid in Q2 2024. We are monitoring all the options, as I said, as a daily business.
Could you remind us of the cash inflow you expect from the earn-out?
The earn-out is defined, as, up to CHF 47 million, and depend on the EBITDA achievement of the Swiss business in 2023.
Okay, thanks.
The next question comes from Gianmarco Bonfanti at Kepler Cheuvreux.
Good day, everyone. Two questions from my side, please. First one is just on your order 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, this CHF 1 million, was relatively low. Do we need to expect now a run rate of CHF 2 million-CHF 3 million going forward from this from this line item? That's just the first question. Second question is about the complaint to the European Commission that you just handed in. I mean, 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 what, what you expect now as an answer from the European Commission, on those three complaints, and also by when do you expect an answer? Thank you.
Let me take your first question. This is an easy one. Yes, CHF 2 million-3 million for the moment is a good assumption, and you refer to the comparison to previous year, I think, where we had CHF 16 million. There was an extraordinary impact of valuation of Earnout Apotal in shares included. So as I said, CHF 2 million-3 million is a good assumption. Yeah, and on the, on the second question, we, we put this complaint for the simple reason that the European Commission stopped the contracts for letting 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 the mandatory introduction of eRx with nondiscriminatory access for all pharmacies as of 1st of January 2022.
I'd say COVID is over, so there is not a need anymore to focus on that part. As we all know, the mandatory launch of eRx has not started yet, and then is almost is more than one and a half years ago. And, yeah, and therefore, and the nondiscriminatory access has not been given the moment we have filed the complaint. That's why we went back to the European Commission and asked for that. It was linked to the Rx bonus, the Rx bonus ban, with these conditions. This is how we, how we set the whole thing up. The European Commission will do a prelim preliminary assessment now, which is due in September.
Within latest one year, the Commission will decide whether to take steps towards proceedings or to close the complaints. Yeah, we will see, how this process will go.
Thank you. 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 Act. 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. It... Yeah. I take that in the draft of this digital law, it 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 they get from the insurance companies. 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 round table on, on eRx, and there was also, seems like one of the key product managers for eRx from the Gematik. He had been also asked about, like, what he expects in terms of market share, that the eRx will have by the end of 2024. He was just saying that he's expecting 50%. How would you square that with the mandatory use by the 1st of January, if the main guy from Gematik is expecting, even then 12 months later, there will be just 50% pick up there?
Yeah. It's difficult to predict and give you a figure right now. What I can say is it, it will become mandatory and maybe a good comparison is the electronic sick note, which became mandatory 1st of January this year, and meanwhile, more than 80% of the sick notes are electronically. Maybe that helps as an indication.
Good. Many, many, thanks. Understood. The, the, the last question is with regard to your EBITDA breakeven or Adjusted EBITDA breakeven target that you're outlining on the slides. If I assume the eRx is rolling out in the way like you have budgeted, what sort of spending level we would see then in the, on the adjusted or in this, in this adjustment bucket, so to say?
Yeah, as, as always said, it's, we are working here in scenarios about the, the ramp up of electronic prescription. Also in terms of marketing, we are very flexible and prepared to do more or less, so exactly to do what is needed. That's why we have, we, we say that the breakeven is excluding the, the positive or negative impact of electronic prescription, and we will achieve it on our base business on OTC BPC.
If I may follow up. In that sense, if the eRx is rolling out like it is in, in your base case, which I assume 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 a marketing campaign at the moment.
Many thanks. That had been all my 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, on the question from Sebastian Vogel about the EBITDA, breaking in 2024. Man, in what kind of scenario, regarding Rx development, would you get into a negative EBITDA? When, when, how fast does it drive that, that something like that would happen?
I would say the only scenario is, when we do a huge marketing campaign and no eRx will end up with us. 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, where we see a very sustainable, loyal customer base, with upside potential towards sales in prescription drugs. Yeah, several scenarios, but we are very excited about the actual development and the indications of increasing electronic prescription in Germany.
Maybe one last question about the midterm 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 the midterm guidance, and as you said, we, we stopped to give a guidance on an absolute sales number because it really depends on the categories and the structure of sales. 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.
Thank you very much. There are no more questions. I'd like to hand back to the speakers for some closing remarks.
Yeah. Thanks a lot from, from our side, from our team. I said at the beginning, really interesting and exciting developments going on, 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, make it successful and to bring this profitable growth in the future, as guided in our midterm guidance. Thanks a lot for your time, for your attention, have a good day.