In the December 2007
issue:
Generic Pharma
Consolidates--
Cross-Border Activity Grows To Access Global Markets
Generic pharma companies announced seven cross-border deals in November.
This activity involved companies based in India, Hungary and Slovenia
looking abroad to expand their market shares.
...
Health Care’s Big Spenders In 2007--
46 Buyers Each Spent $1.0 Billion Or More On M&A
Nearly half of all deals announced and all
dollars committed to the health care M&A market in 2007 have been made by
repeat buyers. Read the issue to see who the most active buyers are, the
sectors they are targeting and their reasons for buying.
...
In the Departments
Services
-Health Care Services
-Deal Summaries
-Additional Transactions
-Transaction Updates
Technology
-Health Care Technology
-Deal Summaries
-Additional Transactions
-Transaction Updates
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Articles Archive
Companies Mentioned in this issue:
December 2007
A
Advanced Healthcare p4
AEW Capital Management p4
Agensys p15
Akrihin p10
Alere p8
Alliance Imaging p3
Amedisys p1
AseraCare p2
Aspen Group p10
Aspen Pharmacare p10
Astellas Pharma p15
AstraZeneca p1
Aurora Health Care p4
B
Beecken Petty O’Keefe p2
Benchmark Assisted Living p3
Bethesda Resources p3
Beverly Enterprises p2
Biogen Idec p15
Boston Scientific p16
C
Capella Healthcare p2
Catholic Health East p3
CB Richard Ellis p4
Celgene Corp. p16
Cellofarm p10
ChristieCare p2
CIGNA, Inc. p4
Co-pharma p10
Cognizant Technology Solutions p15
Community Health Systems p2
Covington Associates, LLC p8
D
Doctor’s Behavioral Health Center p2
Doctor’s Medical Center p2
E
Emeritus Assisted Living p8
Essentia Health p8
Excela Health p3
Excela Health Westmoreland Hospital p3
F
Fiserv p4
FKP, Ltd. p4
Formula Naturelle (Pty.) Ltd. p10
Freeport Financial LLC p2
Fresenius Medical Care & Co. KGaA p16
G
Gedeon Richter p1
Genefar BV p1
Getinge AB p16
GlaxoSmithKline p16
Global Oncolytics p10
GoldenLiving p2
Great-West Life & Annuity p4
Great-Western Healthcare p4
Greater Cincinnati Associated Physicians p4
Guidant p16
Gyrus Group p15
H
HemoSense p16
Home Health Corp. of America p2
I
Inverness Medical Innovations p8
K
Krka, d.d. p10
L
LHC Group p8
M
Macquarie p4
marketRx p15
Maverick Healthcare p2
MCG Capital Corporation and Prospect Capital Corpo p2
Medical Associates Health Centers p4
Merck & Co. p16
Mercy Hospital of Pittsburgh p3
Mercy Jeannette Hospital p3
Mercy Medical Center p2
Merrill Lynch Capital p2
Mexicana p10
N
Neurimmun Therapeutics AG p15
New England Health Enterprises Business Trust p3
New England Imaging Management, LLC p3
North Atlantic Value, LLP p3
O
Oconomowoc Memorial Hospital p4
Olympus Corporation p15
Onco Therapies Ltd. p10
P
Papastavros Associates Medical Imaging p3
ParadigmHealth p8
Pharmion Corp. p16
PHW Group p10
Pittsburgh Life Sciences Greenhouse p16
Pittsburgh Mercy Health System p3
Polpharma p1
Powercliff Ltd. p10
Principal Senior Living Group p4
ProHealth Care p4
ProNova BioPharma p16
Q
QAS p8
R
RadNet p3
ReAble Therapeutics p8
Regeneron Pharmaceuticals p15
Reliant Pharmaceuticals p16
Renal Solutions p16
Resurgence Health Group p3
Rural Hospital Acquisition p3
S
sanofi-aventis p8
Shattuck Hammond p2
Sisters of Charity of Seton Hill p3
Solara p10
Stanislaus Behavioral Health Center p2
Strides Arcolab p10
Strides Latina p10
Sumifarma p10
SunLink Health Systems p3
T
TAD Pharma GmbH p10
TeleCare Corp. p2
Tenet Healthcare Corp. p2
The Blackstone Group p8
The Dakota Clinic/Innovis Health p4
The GPT Group p3
The Halifax Group p2
The Health Alliance of Greater Cincinnati p4
The Kuwait Finance House p3
Tri-Isthmus Group p3
Triad Hospital p2
U
UBS Securities, LLC p8
UnitedHealth Group p4
University of Pittsburgh Medical Center p3
W
Waukesha Memorial Hospital p4 |
Generic Pharma Consolidates--
Cross-Border Activity Grows To Access Global
Markets
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Email Editor
The Pharmaceutical sector continues to
generate the highest levels of deal volume and dollars spent in the health
care merger and acquisition market. November was no exception, with the
announcement of 15 deals worth a combined total of $7.9 billion. Seven of
those deals, worth a combined total of $1.8 billion, involved cross-border
acquisitions of generic pharmaceutical companies, as buyers seek to gain
global scale and tap into promising emerging markets.
These seven initiatives
began with companies that are based in what are historically Second or
Third World countries, including Hungary, Slovenia and India. Gedeon
Richter (PK: GDRB), a large pharma company based in Hungary, has been
expanding in Central and Eastern Europe with the acquisition of two
generic pharma companies from the investment firm Genefar BV. In
the first of these two deals, it is paying $1.3 billion in stock to buy
Polpharma, a Polish company that manufactures and markets generic and
OTC products. The price to revenue multiple is 3.9x and the price to
EBITDA multiple is 13.9x, both on the high side for a generic pharma
concern. However, Gedeon’s management believes that relative to her
neighbors, Poland spends less per capita on pharmaceuticals and thus
represents an opportunity for increased spending on drugs as Poland
continues its economic integration into the EU and those Polish plumbers
the French fret about so keep sending money back home. With Gedeon’s
backing and resources, Polpharma will become the second-largest generic
company in Poland. Gedeon is also buying from Genefar an 80.6% interest in
Akrihin, a Russian company that manufactures and markets generic
and OTC products, for $128.0 million. The price to revenue multiple here
is a lower 2.0x, reflecting perhaps a greater risk in Russia. After these
two deals close, Genefar will own about 26.75% of Gedeon.
Krka, d.d.
(LJ: KRKG), Slovenia’s largest pharmaceutical company, announced its first
acquisition with the $142.6 million cash purchase of Germany’s TAD
Pharma GmbH from PHW Group, a family-owned business group. With
plants in Slovenia, Croatia, Poland and Russia, this deal now allows Krka
to tap directly into the Western European market. TAD Pharma manufactures
and markets generic pharmaceuticals, with a portfolio of 296 products. The
company generates annual revenue of about $87.2 million, 11% of which is
derived from exports. The price to revenue multiple is accordingly 1.6x.
Since Krka is among the world’s 15 largest generic pharma companies, this
deal benefits TAD because its increased size enables it to be more
competitive in the fierce German generics market. Further, implementation
of recent health care reforms in Germany has taken a toll on the generic
pharma industry, one which will be better borne by those companies with an
international orientation and vertical integration.
An alliance crafted between
India’s Strides Arcolab (BSE: 532531) and South Africa’s Aspen
Group (J: APNH), two pharma companies that focus on generics, gave
rise to four cross-border deals this month. Though the two have been
cooperating since 2003, these four deals give teeth to the alliance. In
the largest of them, Aspen is buying a 50% interest in Strides Latina,
the Strides subsidiary which sells generic drugs in Brazil (Cellofarm)
and Mexico (Solara), for $152.5 million. In 2006, Cellofarm
generated revenue of $69.0 million and Solara generated $6.0 million.
Strides Latina is establishing two further trading companies in Latin
America, Sumifarma and Mexicana, to operate in Venezuela and
Mexico, respectively. Aspen has the option to buy, and Strides to sell,
the remaining 50% interest in Strides Latina. For its part, Strides is
acquiring a 51% interest in Aspen’s Co-pharma, a unit that sells a
range of commodity products in the U.K., for about $5.4 million. Strides
is also acquiring an 80% interest in Formula Naturelle (Pty.) Ltd.,
which owns a basket of nutraceutical products currently marketed by
Aspen Pharmacare in South Africa. The price here is $5.1 million.
Finally, the two companies are forming an alliance to develop and
commercialize oncology products through Strides subsidiaries,
Powercliff Ltd. and Onco Therapies Ltd. In a deal valued at
about $42.8 million, or 2.0x revenue, Aspen is paying $25.75 million for a
50% interest in Powercliff, $16.7 million for a 49% interest in Onco and
has the right to acquire a further 1% of Onco for $340,000. This joint
venture, Global Oncolytics, will complete the basket of existing
capabilities that Aspen has been developing around hormonal and other
sterile capabilities. Strides Arcolab will receive about Rs. 3.0 billion
in near-term cash flow.
The historic dearth of the
capital needed for R&D in these countries has skewed their pharma
industries away from developing new branded drugs towards the reverse
engineering and manufacturing of generic drugs. And since public health
issues tend to loom large in such economies, pharma companies there have
concentrated on drugs that serve large populations, rather than
specialized niche markets. Finally, these companies have taken advantage
of low production costs, particularly in labor, to grow their businesses.
Concentrating on lower-cost products such as generic drugs, OTC products
and nutraceuticals, as compared with competing branded prescription drugs,
tends to favor those companies utilizing retail models, with lower prices
and higher volumes. Thus, generic pharma companies seek to expand their
selling territories across borders to enlarge their customer bases,
particularly in countries where drug prices are not strictly regulated,
and to capture market share from higher priced branded pharmaceutical
products, even if it is at the expense of big pharma.
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