The CEO of German generics maker Stada Arzneimittel sees a merger with a branded drugmaker of the same size as a way to keep from being gobbled up by someone larger. Sun Pharmaceuticals owner Dilip Shanghvi has said the Indian generics maker needs a U.S. deal so it can grow in the world's largest market. Still the latest rumor is that Sun is now looking in Europe for a deal and may be eyeing the same Stada that seems so intent on remaining independent.
A spokesman for Sun denies it while one for Stada declines to comment, but a source tells Bloomberg a merger is possible.
A look at market share suggests that while Sun might benefit most from a U.S. deal, Stada would give it a lot more heft in Europe. Sun gets 42% of its sales from branded drugs in India, 39% from generics in the U.S. and 11% from Europe and elsewhere, Bloomberg reports. Stada get 96% of sales from Europe and Russia. It acquired Serbian drugmaker Hemofarm in 2006.
Also, the billionaire Shanghvi has created his business with 10 deals in 14 years buying undervalued companies. Stada shares have been down and Sun's up. Still Germany-based analyst Odile Rundquist of Helvea says its doesn't add up to her since Sun has been looking to grow in the U.S. where the market potential is greatest.
Shanghvi acknowledged in January 2011 that he was sizing up U.S. possibilities but that was 19 months ago. Stada CEO Hartmut Retzlaff as recently as May told shareholders that the company might need to get bigger. Stada's fellow generics companies have been joining forces to take advantage of economies of scale at a time when top-selling drugs are falling off patent by the handful. Capitalizing on that opportunity requires enough capacity to turn out big-selling meds at high volume and low cost. Sun has capacity.
And as the recently departed CEO of Human Genome Sciences H. Thomas Watkins can attest, you don't always get to choose. Watkins lost his job this week after GlaxoSmithKline ($GSK) finally won its monthslong battle to buy HGS, a company that said it didn't want to do a deal.
- here's the Bloomberg story
India's Sun scouts U.S. for 'bigger' acquisition
Stada must join the generics buyout binge, CEO says
Glaxo changes the guard at newly bought HGS