Pharma plans New Stada owners cut dividend to fuel growth

Generic drugs giant Stada has had a difficult year following a messy buyout. Its figures remain sound, but investors will pay the price with a slashed dividend.
Quelle: Bloomberg
Keep taking the medicine.

Why would a patient or healthcare provider choose to buy an expensive branded drug when the exact same medicine is available as a cheaper, non-proprietry version?

That’s the premise that pharmaceutical companies producing so-called generic drugs, or chemicals that are no longer patented, have long exploited. And it’s made them big bucks, especially in developing markets.

But it's an increasingly tough proposition for German generics specialist Stada, one of Europe’s biggest suppliers of generics, which has had a tough year. A bloody on-off takeover battle saw it eventually acquired by US private equity firms Bain Capital and Cinven for €5.4 billion, but not without the loss under a cloud of its chief executive and chief financial officer. And on Thursday it announced in its latest figures that profits fell by 1 percent in 2017 to €85 million. There was worse news for investors: the promised €0.72 dividend for 2017 has been radically cut to just €0.11 per share.

With Bain and Cinven in the background, Stada may look to make acquisitions amounting to hundreds of millions of euros.

Stada boss Claudio Albrecht said the money would instead be invested to grow the business and expand its market position. Among other things, over the next three years, the company will spend more than €100 million on so-called biosimilars, generic versions of biotech medicines, which are drugs that harness biological processes to provide treatments.

In addition, Stada wants to develop its international presence. In particular, Mr. Albrecht wants to push its generic and branded products, such as flu remedy Grippostad and sunscreen Ladival, in the Middle East and Asia, but a move into the United States is also a possibility.

Stada also plans an ambitious program of product development. Market position, it is felt, can be more easily defended with complex, hard-to-imitate products like biosimilars, and products with a specific dosage mechanism, like inhalers. Takeovers could also be part of the strategy: with Bain and Cinven in the background, Stada may look to make acquisitions amounting to hundreds of millions of euros, said Mr. Albrecht.

To finance the expansion, Stada plans cost-cutting and efficiency measures. From 2020, it hopes to save more than €100 million per year through restructuring and natural wastage of staff.

Mr. Albrecht, who acted as a consultant for the buyers during the takeover, will lead Stada until August, when he plans to step up to the supervisory board. The new chief will be Peter Goldschmidt, the former head of US operations at rival Sandoz.

He will inherit a mixed financial performance and some tricky governance problems. While 2017 profits were affected by one-off takeover costs, Stada boosted sales by 8 percent to €2.3 billion, with business in Russia a highlight. The firm expects revenues to grow to just under €2.5 billion in 2018, with net profits hitting €230 million.

However, investigations continue into alleged breaches of duty and violation of compliance standards by former CEOs Hartmut Retzlaff and Matthias Wiedenfels, and CFO Helmut Kraft. Former Stada chairman Carl Ferdinand Oetker has warned there is “concrete evidence” of wrongdoing.

Maike Telgheder is an editor at Handelsblatt, covering the health economy, pharmaceutical companies and chemistry. To contact the author: [email protected]