(Bloomberg) -- Stada Arzneimittel AG will shop around for niche drug producers in central and eastern Europe to fuel expansion plans and boost regional sales growth as it cuts costs and shifts some production to its own facilities, the German pharmaceutical company’s regional chief, Ronald Seeliger, said.
Increasing the company’s presence will help fill the gap in a region where consumption still lags western Europe, said Seeliger, who’s in charge of operations in Poland, the Czech Republic, Slovakia, the former Yugoslav republics, Romania, Bulgaria, Hungary and Albania. Those states account for about 45 percent of Stada’s output volume and 11 percent of group sales. Regional sales growth is forecast at between 5 percent to 10 percent a year.
“We will align the structure throughout all the countries to get some benefits from synergies, finance, administrative things and regulatory affairs,” said Seeliger in an interview in Belgrade on Feb. 14.
Stada’s push in the region follows last year’s $6.4 billion takeover by Bain Capital Private Equity LP and Cinven Ltd. and Seeliger’s increased responsibility in former Communist eastern Europe. Stada, one of Europe’s largest makers of copycat pills, will get its fifth chief executive officer in a little over two years in September. The generic drug industry has been struggling amid heightened competition. Bloomberg Intelligence said 2018 will be a “volatile year” for the specialty-generic pharmaceutical industry.
“Companies that continue to reinvest in their pipelines and show organic growth in addition to expansion through M&A ... should continue to succeed,” wrote BI’s Elizabeth Krutoholow and Curt Wanek in a 2018 industry outlook.
Stada’s Hemofarm unit in Serbia, purchased in 2006, is expanding with a 22 million-euro ($27 million) new packaging plant that the company will officially open this year to separate production from packaging.
Bringing some production inhouse will also reduce reliance on some Asian and European suppliers of products delivered in bulk or blisters, while the company will keep contracts with makers of primary active pharmaceutical ingredients, or APIs. In China, for instance, some supplier factories are shutting down for a few months as the Asian nation struggles to control rampant pollution, Seeliger said.
“That’s having a big, big impact on us,” he said. “Stada is seeking to insource many more products, to produce them in-house for better availability, better costs, reliable quality and for better logistics.
In eastern Europe, Stada will look at acquisitions of targets with revenue of between 5 million euros and 15 million euros, and output of semi-finished and finished products, Seeliger said. Besides the planned expansion in Serbia, Hungary and Romania will probably have the “most push” because of high growth forecasts. Sales management, now handled in Belgrade, will move to his operations in Budapest, he said.
Overall, the changes Seeliger foresees in his new expanded role will help Stada adapt to changing market conditions as inhouse production and acquisitions take effect.
“It will give us much more flexibility to react to any kind of immediate demand from the market,” he said.
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