Global Insight Perspective | |
Significance | The acquisition, which follows the diversified technology concern's sale of its respective branded pharmaceutical interests in North and Latin America and in the Asia Pacific region, places Meda among the leading speciality pharmaceutical companies in Europe. |
Implications | Meda says the deal will strengthen its position markedly in the most important European pharmaceutical markets while deepening its penetration in the high-priority therapeutic areas of cardiovascular disease and dermatology/oncology. Cost synergies are expected to be more than 150 million kronor. |
Outlook | Acquisitions and long-term partnerships are central to Meda's long-term growth strategy. The 3M deal continues the encouraging trend marked by other recent transactions, such as the Swedish company's acquisition of German-based Viatris in August 2005 and its strategic partnership last June with Spanish Almirall for respiratory disease treatments. |
Sweden's Meda has completed its acquisition of 3M's pharmaceutical division in Europe, placing it among the leading speciality pharmaceutical companies in Europe with sales of more than 7 billion kronor.
The purchase price for the deal, which was originally announced last November, has been set tentatively at 5,640 million kronor (US$824.3 million), somewhat below the debt-free price of 6,200 million kronor cited two months ago. A favourable exchange-rate effect has since shaved around 300 million kronor from the remaining difference and consists of employee-related liabilities and adjustments for working capital, Meda explained. The company is backing up the acquisition with a new share issue at 160 kronor per share, to raise a maximum of 1,857 million kronor.
3M has been peeling off its pharmaceutical interests gradually over the last few months, following a review of the strategic options for its branded pharmaceuticals business and its immune response modifier (IRM) platform in April 2006. Last November, the diversified U.S. technology concern announced a batch of agreements to sell the branded pharmaceuticals business for around US$2.1 billion in total.
While Meda scooped up the pharmaceutical operations in Europe, they went to Graceway Pharmaceuticals (including rights to certain IRM molecules) in the United States, Canada and Latin America (for US$875 million), and to Ironbridge Capital and Archer Capital in the Asia Pacific region, including Australia and South Africa (US$349 million). Both of the latter transactions were completed in the fourth quarter of 2006 (see Asia-Pacific: 8 December 2006: 3M Divests Asian Pharma Interests into Separate Company; and Latin America: 2 January 2007: 3M Exits Pharmaceutical Production in Latin America).
For Meda, the acquisition of 3M's pharmaceutical interests represents an important strategic advance that brings in complementary products and synergies for its marketing organisation. Not only that, but the 3M business is already turning a healthy profit. Estimated sales for January to September 2006 were 1,563 million kronor (equating to annual sales of around 2 billion kronor), generating earnings before interest, tax, depreciation and amortisation (EBITDA) of 468 million kronor and an EBITDA margin of 30%.
In product terms, the core of the 3M portfolio is Aldara (imiquimod), Minitran (nitroglycerin) and Tambocor (flecainide acetate). These three “niche-busters” generate around 80% of total sales in the business and overalap with Meda’s existing presence in the dermatolgy/oncology and cardiovascular categories—notably through the antiseptic Betadine (povidone iodine), for the prevention of skin infections, and Cibacen/Cibadrex (benaprezil HCl) for the treatment of high blood pressure. Meda acquired the marketing rights to Cibacen and Cibadrex in most of the European Union (EU) member states from Swiss pharma giant Novartis in early 2005 (see Sweden: 20 January 2005: Meda Picks Up Rights to Novartis Franchises).
Aldara, a treatment for skin cancers resulting from over-exposure to the sun, is seen as having the most sales potential. The drug is already licensed in the United States for the treatment of actinic keratosis, a know precursor to skin cancer, and further approvals for this indication are under way in Europe. Current sales of Aldara in Europe are around 250 million kronor, with "promising" growth, Meda notes.
Tambocor for cardiac arrhythmia and Minitran for angina are well-established cardiovascular therapies whose biggest European markets are France, Germany, Italy and Spain, the Swedish company says. A controlled-release formulation of Tambocor has been launched on a number of European markets and makes up around 30% of the brand's overall sales.
Given the product overlap, Meda also foresees synergies in sales and marketing that will consolidate its presence in these key European markets. Cost synergies are expected to be more than 150 million kronor, with the largest proportion coming from administrative rationalisation.
Outlook and Implications
Meda regards acquisitions and long-term partnerships as central to its strategic goal of becoming the leading speciality pharmaceutical company in Europe. The Swedish company has plotted a steady course towards this objective over the last few years.
In August 2005, Meda acquired Germany's Viatris for 750 million euro (US$993.4 million), giving the Swedish company access to new markets in southern Europe and to Viatris' multi-dose dry-powder inhaler, Novolizer, as well as associated active ingredients such as budesonide (see Sweden: 8 August 2005: Meda Acquires Viatris in 750-mil.-Euro Deal). More recently, Meda tied up with Spanish pharmaceutical company Almirall to extend the Novolizer franchise to new respiratory therapies (see Spain: 13 June 2006: Almirall Enters Strategic Partnership with Swedish Pharma Company Meda). With its promise of product and marketing synergies, the acquisition of 3M's European pharmaceutical business continues this encouraging trend.