Redcare Pharmacy Faces Dual Challenges in 2026

Redcare Pharmacy enters 2026 navigating significant headwinds from two distinct fronts. The company must simultaneously defend its core over-the-counter (OTC) business against a formidable new competitor and manage a substantial bond repayment. This situation places a sharp focus on the firm's ability to adapt its business model while maintaining financial flexibility.

A near-term financial commitment adds to the company's operational challenges. On December 19, 2025, Redcare announced that holders of its 2021/2028 convertible bond had exercised their put options for a total of €64.5 million. The payment is scheduled for January 21, 2026.

This payout represents the final component of a comprehensive liability restructuring executed throughout 2025:

• In April 2025, the company repurchased €157.9 million of the original convertible bond.
• Concurrently in April 2025, it issued new convertible bonds worth €300 million with a maturity extending to 2032.
• The upcoming January 2026 payment of €64.5 million will settle with put-exercising bondholders.
• Following this, only €2.6 million of the original bond issue will remain outstanding.

This refinancing package has successfully extended the debt maturity profile by six years. Redcare's liquidity position, as of September 30, 2025, showed cash and short-term financial investments of €265.6 million, a significant increase from €177.6 million at the end of 2024. This robust liquidity suggests the impending payment is manageable without impacting core operations.

Strategic Pivot: Prescription Drugs as a Growth Engine

In response to market pressures, Redcare's management is strategically shifting greater emphasis toward prescription medications (Rx)—a segment where its new competitor is not currently active. The company's third-quarter 2025 results already demonstrated strong momentum here, with Rx revenue surging over 42% to €272 million. This growth is largely fueled by the ongoing nationwide rollout of Germany's electronic prescription (E‑Rezept) system.

To support this strategic shift and enhance overall efficiency, Redcare has expanded its operational footprint:

• Commissioning a new logistics center in the Czech Republic in December 2025.
• Achieving faster delivery times, particularly to Austria and Southern Germany.
• Focusing on a more differentiated service offering within the prescription segment.

This pivot is designed to partially insulate the company from direct price competition in the OTC arena and capitalize on the structural growth within the Rx market.

dm-drogerie markt Emerges as Potent OTC Rival

The competitive landscape for Redcare shifted notably in mid-December 2025 with the launch of "dm-med," an online pharmacy platform by German retail giant dm-drogerie markt. Since December 16, 2025, dm has offered approximately 2,500 OTC products online, shipping to German customers from a logistics hub located in Bor, Czech Republic.

Should investors sell immediately? Or is it worth buying Redcare Pharmacy?

This OTC segment is a crucial revenue driver for established online pharmacies like Redcare. dm enters the market with several inherent advantages:

• Nationwide brand recognition and trust.
• A vast, pre-existing customer base from its brick-and-mortar drugstore operations.
• Established and efficient logistics networks.
• Substantial financial resources to engage in potential price competition.

Market analysts express concern that OTC profit margins could face further compression if dm chooses to compete aggressively on price. In a sector where profitability is already strained, this prospect weighs on investor sentiment across the entire online pharmacy market.

Divergent Analyst Views and Stock Performance

Equity researchers are divided in their assessment of Redcare's prospects. UBS maintains a cautious "Neutral" stance with a price target of €74. In contrast, Deutsche Bank is notably more optimistic, issuing a "Buy" recommendation with a €214 price target. This wide discrepancy highlights market uncertainty regarding Redcare's capacity to defend market share while sustaining profitability.

This uncertainty is clearly reflected in the company's stock performance. Over the past twelve months, the shares have lost nearly half their value, ranking among the weakest performers in the MDAX index. Competitors like DocMorris also faced pressure in 2025, indicating sector-wide challenges rather than company-specific issues.

Recently, however, the stock has shown tentative signs of stabilization. Shares closed at €67.15 on Friday. While this represents a 30-day gain of approximately 7%, the price remains roughly 50% below its 52-week high.

Key Dates and Catalysts for the Coming Year

Two imminent dates are critical for investors monitoring Redcare's trajectory:

• January 21, 2026: The €64.5 million convertible bond repayment.
• March 4, 2026: Publication of the full 2025 annual report, including forward guidance.

The March report will be particularly significant. It will provide the first comprehensive data on the actual impact of dm's entry on Redcare's OTC sales and reveal whether the company maintained its recently reported adjusted EBITDA margin of 2.4%. The stock's path in 2026 will likely be determined by two key factors: the successful execution of its strategic shift toward the Rx business, supported by the E‑Rezept rollout, and the extent to which intensified OTC competition permanently erodes the company's earning power.