German pharmaceutical company Stada’s new chief executive is pressing the pedal to metal.
Just five weeks ago, Matthias Wiedenfels succeeded Hartmut Retzlaff, who had run the mid-size drug maker for 23 years. Last Monday, Mr. Wiedenfels announced the company’s new mid-term growth targets.
He hopes to increase sales by around €500 million by 2019, to a total of €2.6 billion ($2.8 billion). By that time profits, adjusted for nonrecurring special items, should rise by around 50 percent to €250 million.
Mr. Wiedenfels, who replaced Mr. Retzlaff after he took indefinite medical leave, wants to achieve these goals with a company-wide program that, among other things, is supposed to simplify structures and open up previously untapped sales potential. According to Stada, which is based in the western state of Hesse, the program doesn't include job cuts.
“Stada's growth targets are ambitious but reachable,” said Timo Kürschner, an analyst at the Landesbank Baden-Württemberg. He considers the intention to increase the share price to be an important signal, since the stock has been undervalued for years.
Stada's growth targets are ambitious but reachable. Timo Kürschner, Analyst, Landesbank Baden-Württemberg
Mr. Wiedenfels, 43, told Handelsblatt that he wants above all to reduce the company’s complexity.
“At the moment, Stada is more of an entrepreneurial network than a single company,” said Mr. Wiedenfels, adding that this wasn't negative in itself but was due to the company’s locally oriented marketing strengths.
"Up to now, locally responsible managers have been richly rewarded for their local performances. In the future, remuneration for success will factor in contributions to company revenues and profits much more heavily. We intend to see to it that Stada becomes significantly more profitable.”
Stada wants to optimize marketing costs and reduce expenses for production and administration. In a letter to employees obtained by Handelsblatt, Mr. Wiedenfels says the business model based on generic drugs and proprietary products is not being questioned. Stada is also seeking to get more involved in innovative growth markets such as beauty products.
Even if from a legal perspective Mr. Wiedenfels is only an interim head of Stada, the new mid-term goals don't give the impression that he intends to only be a provisional solution.
“The fact is that I intend to invest all my capabilities, everything I can, for Stada,” he said. “I'm confident of being able to handle managing the company. I know the firm well enough to know where real growth potential lies. And I am widely enough accepted here.”
It’s still an open question whether and when Mr. Retzlaff will return, said Mr. Wiedenfels, who has doctorate in legal studies and has been with Stada since 2009.
The pharmaceutical company needs a clear managerial line because independent investment firm Active Ownership Capital (AOC) is piling on the pressure. AOC is demanding a restructuring of the company’s non-executive supervisory board and says the firm has been operating below its economic potential.
Mr. Kürschner interprets the new medium-term goals as a clear message to AOC. Those in the know say that for its part, AOC doesn't consider the targets ambitious enough and wants them to be reached faster.
While AOC tries to claim that Stada's new growth targets are a response to its proposals, Mr. Wiedenfels is keen to emphasize that Stada has been at work on the new strategy for a while.
“The criticism from AOC didn't push us. We are familiar with the issues addressed by AOC and had already been addressing them,” he said.
Stada intends to have worked out detailed plans by the presentation of the company’s semiannual figures in early August. The firm has called for ideas and inspirations from employees.
“We need 60 percent continuity, but also 40 percent renewal,” Mr. Wiedenfels said.
Maike Telgheder is an editor at Handelsblatt, covering the health economy, pharmaceutical companies and chemistry. To reach the author: [email protected]