IHS Global Insight Perspective | |
Significance | The generic drug maker is expecting to achieve sales of approximately 2.15 billion euro (US$2.57 billion) and net income of 215 million euro in 2014. |
Implications | Strategic decisions linked to the achievement of these growth targets include the sale or abandonment of production plants as well as the outsourcing of certain activities to third-party providers. In the short and mid-term, the group will cut approximately 800 full-time jobs outside Germany. The cost-cutting programme is expected to be implemented by 2013. |
Outlook | While Stada is on track to deliver positive results through organic growth by 2014, French pharmaceutical company Sanofi-Aventis, which was said to be eyeing the generic maker, denied having any interest in acquiring the German company. The medium-sized company remains however an attractive target in the competitive German generic markets as plenty of speculation presents Pfizer (U.S.) and Actavis as potential buyers. |
Stada's Growth Target for 2014
The Executive Board of German pharmaceutical company Stada Arzneimittel has adopted the long-term growth programme "STADA—build the future", designed to more than double the group's profits by 2014. The programme aims at reaching net income of 215 million euro (US$257.4 million) in 2014, up from 100.4 million euro in 2009, thanks to net sales of 2.15 billion euro, up from net sales of 1.57 billion euro in 2009. The long-term strategy will involve the sales of production plants and a staff reduction of approximately 800 headcounts, thus 10% of Stada's current staff. The Executive Board agreed to invest a total of approximately 20 million euro in the project, which will come at a cost of 50 million euro for the group. For 2010 alone, a net burden of 10 million euro is expected from the implementation of "STADA—build the future", expected to be completed by 2013 and to contribute to growth from 2011.
After Stada closed its books on a difficult year in 2009, the group is expecting growth in terms of sales and key earnings figures adjusted for one-time special effects for the year 2010. Last year, sales went down by 5% year-on-year (y/y) in the reported results to 1.6 billion euro, mainly due to portfolio changes and currency effects, which if taken into account translate into a 4% sales growth. Sales of generics, which account for 71.1% of the group sales, suffered from very difficult conditions notably in Stada's home market, Germany. Global generics sales shrank 3% y/y to attain 1.1 billion euro in 2009.
Stada: M&A Target
Meanwhile, Stada appears as a sought-after target for companies seeking to acquire a generic maker in Europe. Rival generic maker Actavis (Iceland) and pharma giant Pfizer (U.S.), which were beaten by Teva (Israel) in the race to win Ratiopharm (Germany) in March 2010, are now both believed to be eyeing Stada. Meanwhile, French pharmaceutical company Sanofi-Aventis, very active on the M&A side since 2009, has also been said to have interest in the German firm. These rumours have however been denied today as Sanofi reiterated its objective to bag small-to-medium sized generics and consumer healthcare companies.
Outlook and Implications
Stada's move confirms a cost-cutting drive set to partly offset an increasing pressure put on generics prices worldwide and notably in Germany. The difficult environment for generics has given rise to consolidation and cost-cutting strategy in Stada's home market where mandatory rebate schemes are continuously eroding generics makers' revenues. The most recent consolidation will see Teva become the second largest generic firm in Germany after its acquisition of rival Ratiopharm in a deal worth US$4.95 billion (see Germany: 19 March 2010: Teva Acquires Close Competitor Yet Again, Bags Ratiopharm for US$4.95 bil.).
Meanwhile, further consolidation is expected in the European generic market as Stada and Icelandic rival Actavis were reported to be close to merging by the German financial newspaper Platow-Brief at the end of May 2010. Actavis' failure in acquiring Ratiopharm at the beginning of 2010 came as another blow for the company whose sell-off failed in April 2009 after four months of unsuccessful negotiation (see Germany: 25 May 2010: Actavis, Stada to Merge, Reports Say). Deutsche bank, which backed Novator's takeover of Actavis in 2007, is apparently planning to convert the Icelandic firm's 4-billion-euro debt into stock to merge Actavis with Stada. In the meantime, U.S. pharma giant Pfizer is also said to actively eye the generic maker after having lost the battle for Ratiopharm against Teva. In a conference in March 2010, Stada CEO Retzlaff said Stada's executives would not block a decent takeover offer, which confirms Stada could be the next generic maker targeted by takeover bids in Germany.