Global Insight Perspective | |
Significance | Stada's sales grew by 26% year-on-year (y/y) in 2007, Jerini's revenues were up by 42% y/y, while GPC Biotech suffered a 19% y/y downturn in revenue. |
Implications | While Stada is hoping that acquisitions in emerging markets will boost growth and Jerini is eagerly awaiting the approval of Icatibant to trigger a new stream of revenue, GPC Biotech has warned that its current cash assets are sufficient for just three years of further operations. |
Outlook | Having diversified revenues is a crucial part of any drug company's growth strategy, and GPC Biotech will need to either seek out R&D alliances with Big Pharma or consider in-licensing later-stage drug candidates. A more likely outcome, though, is that GPC could be taken over by a bigger firm looking to expand its biotech research capabilities |
Stada on the Acquisition Trail
German drug-maker Stada has closed the books on a twelfth consecutive year of growth, with group sales up by 26% year-on-year (y/y) on a reported basis, reaching 1.6 billion euro (US$2.5 billion). In comparable terms, sales growth was more moderate but still in double-digit territory at 14% y/y. The group's Generics business continued to provide the bulk of Stada's revenues and also saw the highest level of growth, with sales of 1.2 billion euro up by a reported 27% y/y, compared with a 17% y/y increase to 304 million euro in turnover for the Branded Products division. Operating costs as well as one-time costs brought on through acquisitions were fairly steep compared with 2006; spending on R&D, for example, grew by 21.1% y/y to stand at 39 million euro. In spite of this, operating profit still grew by a healthy 24% y/y as calculated by Global Insight, reaching 786.4 million euro before exceptional items.
Stada remains vague on financial guidance for 2008, but has said it remains confident of a positive performance in light of its strategy to focus on rapidly growing markets and consequently reducing its reliance on traditional markets in Western Europe as its main growth drivers. In the meantime, Stada remains firmly on the acquisition trail. The year just ended saw the German firm make acquisitions in Russia, the United Kingdom and Serbia, and Stada intends to continue in the same vein for the foreseeable future. In a press release, the firm said that it "plans to accelerate the long-term growth course by making appropriate acquisitions in the future […] and continuously examines suitable takeover projects."
Stada Arzneimittel: Full-Year 2007 Financial Results (mil. euro) | ||
FY 2007 | % Change, Y/Y | |
Group Sales | 1,570.5 | 26 |
Generics | 1,154.4 | 27 |
Branded Products | 304.0 | 17 |
Sales in Germany | 579.8 | 20 |
Cost of Sales | 358.1 | 10.6 |
General and Administrative Costs | 114.6 | 26.2 |
Personnel Expenses | 272.4 | 45.1 |
Research and Development | 39.0 | 21.1 |
Operating Profit* | 786.4 | 24.0 |
R&D as a % of Sales | 2.5 | 0.1 pp lower |
Operating Margin | 50.1 | 1.0 pp higher |
Operating profit calculated by Global Insight as group sales minus cost of sales, general and administrative costs, personnel expenses and R&D expenditure. | ||
Jerini Remains On Target Ahead of Icatibant Verdict
Elsewhere in Germany, pharmaceutical company Jerini has produced a strong set of financial results for 2007 that are fully in line with the group's expectations. Revenues grew by 42% y/y and reached 18.6 million. This strong growth was largely attributable to contributions received through ongoing R&D alliances with the likes of Abbott Laboratories, Baxter AG and Alcon Research, as well as an improved performance from its JPT Peptide Technologies unit. Expenditure on R&D also grew, up by 26.3% y/y at 29.3 million euro, and had a knock-on effect on Jerini's operating performance. Operating loss, calculated by the group as earnings before interest and taxation (EBIT), expanded by 24.3% y/y to stand at -31.2 million euro.
Jerini's heavy R&D burden in 2007 was in large part due to its regulatory filing of hereditary angioedema (HAE) drug Icatibant with the FDA in the United States and the European Medicines Agency. At the end of the year, the group learned that the FDA was planning to speed up its review of the drug (see Germany: 21 December 2007: U.S. FDA Grants Priority Review Status to Jerini's Application for Icatibant), giving Jerini reason to expect a positive verdict from the U.S. drug regulator. The company has said it is anticipating a decision from both the FDA and the EMEA by the end of next month.
Stark Assessment of GPC Biotech's Cash Situation
Finally, German drug developer GPC Biotech has also published its full-year results for 2007, which have been heavily affected by the group's decision to withdraw its U.S. marketing application for prostate-cancer drug Orplatna (satraplatin) last July (see Germany: 31 July 2007: GPC Biotech Withdraws U.S. NDA for Satraplatin Pending Arrival of New Survival Data). Full-year revenues were down by 19% y/y and stood at 18.3 million euro, with contributions from U.S. development partner Pharmion—now part of Celgene—having fallen considerably. Spending on R&D was also down, contracting by 21% y/y to reach 51.4 million euro after the near-completion of the Phase III SPARC trial on satraplatin. General and administrative (G&A) costs, however, amounted to 23.8 million euro and grew significantly, up by 65% y/y thanks to GPC's efforts in the early part of the year to set up a marketing team for satraplatin in the United States. As a result, operating loss (calculated by Global Insight as revenues minus R&D spending and G&A expenditure) amounted to -72.3 million euro.
GPC Biotech held some 65.2 million euro in total assets of cash, cash equivalents, marketable securities and short-term investments at the end of 2007. The group estimates that this will be sufficient to support its business operations for a further three years. Its financial guidance for 2008 is equally stark, with full-year revenues expect to plunge to 5-7 million euro, although expenses are projected at under 35 million euro, marking a noticeable decline due to GPC Biotech's ongoing programme of cost-cutting (see Germany: 19 November 2007: GPC Biotech to Cut Workforce by Nearly Half in Wake of Satraplatin Disappointment).
Outlook and Implications
These three German drug companies are at very different stages in terms of their financial performance, outlook and pipeline situation, but an overview of how they fared in 2007 is of use as a snapshot of the country's pharmaceutical industry. Stada, already a well-established player in Germany and Western Europe, is increasingly turning to emerging markets in the East of the continent to foster rapid future growth. The strategy is already paying off in Russia, where a volley of acquisitions has seen Stada's share of the pharmaceutical market grow (see Germany: 24 March 2008: Stada Increases Share of Russian Drug Market). Jerini is expecting revenues from its first-ever marketed drug to begin rolling in before the end of this year, but is also ensuring growth from other sources thanks to its policy of signing up new development partners (see Germany: 10 January 2008: Jerini Signs Up Baxter for Peptide Therapeutic Protein Collaboration). However, the future looks far less certain for GPC Biotech, which has recently announced its intention to scale down its early-stage R&D staff in addition to other cutbacks. Beyond satraplatin, GPC Biotech's only other compound in clinical development is 1D09C3, a monoclonal antibody currently in Phase I trials for relapsed/refractory B-cell lymphomas. With only three years' worth of cash left in the bank, GPC cannot afford to stake its future on 1D09C3, and will either have to turn to collaborations with pharmaceutical companies or consider in-licensing later-stage drug candidates for development. A more likely outcome, though, is that GPC could be taken over by a bigger firm looking to expand its biotech research capabilities.