- 8 constituents
- 14.5% 1y performance
- 20.0% volatility
Economies of scale in the production of generics through acquisitions, as Teva's of Ratiopharm from Germany (2010) and of the generics division of Allergan asset (2015) , may have been tactical responses, but the company's travails throw unforgiving light on diverging worldwide strategies
- Renewed consolidation pursued by industry leaders from developing countries (India, Brazil)
- Retrenchment, an option of some (but not all) international pharmaceuticals
- M&A opportunities of large private equity funds
Emerging market opportunities power the international ambitions of national champions such as SunPharma in India (SUNPHARMA listed on Indian stock exchange), a key player following the takeover of local competitor Ranbaxy in 2014 (estimated at $4bn at the time), Intas Pharma (private), also of India, which acquired the UK & Ireland Actavis divisons from Teva in 2016 and remains a strong candidate for Mallinckrodt's generics division asset, with $1bn bid, which is below the asking price of $1.2bn (on fears of opiate-based painkillers related lawsuits) or EMS from Brazil (in the running for Sanofi's European generics business in 2018). With supportive national governments, confident in their ability to control production costs and to finance their international expansion, a new class of pharmaceutical majors appears to be on the rise in emerging markets
The trend to spin-off generics divisions, chosen by Mallinckrodt on the other hand, is also pursued by Sanofi of France asset putting its European division up for sale (discussed since 2015) with two industry contenders (EMS from Brazil and Torrent Pharma from India) and a number of private equity candidates.
Germany's Fresenius acquisition of US Akorn asset , maker of medical creams and ophthalmic drugs, was agreed in April '17 on the premise to widen its product range in hospitals and pharmacies but completion has been postponed into 2018. However, by announcing on Feb. 26, '18 an internal investigation into “alleged breaches” of U.S. FDA data integrity requirements relating to product development at Akorn, Fresenius may be signaling its intention to withdraw. AKRX shares fell by 30% on the day
No general conclusion should be drawn however, considering the large commitment of Novartis with its Sandoz division , Japan's Takeda generics business asset or the decision made by Pfizer in 2016 to abandon plans to split the company in 'new drug pharma' and 'generics + biosimilars pharma'
Activist funds however still push for M&A strategies, with the Germany-based Stada Arzneitel takeover by Bain and with competing private equity funds bidding for the Sanofi generics business …
For international pharma, diversification still opens a range of options depending on how tight the connections will be between their business lines - patented drugs, biopharmaceuticals, generics and consumer heath markets
Check our note for Pharmaceutical Majors