The Race for Ratiopharm
It is possible that, by the time you read this article, the race for Ratiopharm will be over, but I will nevertheless take the risk and offer some opinions on the subject.
The fact that the company is up for sale is not likely to come as much of a surprise to those who follow events in the generic world. For those who do not, the story is as follows.
Germany’s leading generic company may have slightly lost its way in recent years and become rather bloated and too bureaucratic, but it could still have survived comfortably if all other circumstances had remained equal. However, they did not remain equal and things took a negative turn when Adolf Meckle committed suicide in January 2009 by walking under a train. His body was found on the railway line near his home in the German village of Blauberen near Ulm in South-western Germany with a suicide note after he speculated on Porsche shares and lost an estimated € 1bn when he guessed incorrectly about which way the shares would move.
The result was that his heirs were forced to offer for sale both Ratiopharm and the wholesaler Phoenix to try to clear some of the Meckle family’s debts.
Over the last twelve months names of various suitors for the company have come and gone, but in recent weeks the names of Teva, Actavis and……Pfizer have come to the fore. At one time, Pfizer’s name might have evoked some surprise, but following its tie-ups with Aurobindo and Claris and the launch of a small range of generics in certain European markets this is no longer the case.
Just to digress for a moment from the theme of Ratiopharm, other Big Pharma companies also seem to have been overcome by a passionate desire to enter the generic world – look at previous headlines such as “AstraZeneca ties up with Indian drugmaker” from the Financial Times of 11th March following AZ’s agreements with Torrent and “Sanofi-Aventis Acquires Zentiva For $2.6B” . But as all we older and wiser cynics know, sudden infatuations can lead to ill-judged and hasty actions, sometimes with an unfortunate outcome. Only time will tell which of these companies has the stamina to stay in the business for the long haul.
Back to Ratiopharm. There is no doubt that it would be an attractive acquisition since, whatever its faults, the company still holds the number one position in the German market. Either of the World Number 1s, Pfizer or Teva, would benefit from buying Ratiopharm by significantly strengthening its generic position.
Pfizer would overnight become a major force in generics worldwide, and Teva would become the major player in Germany, a position that has so far, surprisingly, eluded it even though Teva dominates most other markets. Teva would have no problem swallowing Ratiopharm and integrating it in the same way that it has already swallowed so many other acquisitions. A question that must arise in the case of a Pfizer-Ratiopharm marriage, though, is how well the companies would fit together – the same question that has arisen in other cases where a BigPharma company has dived into the generic sea.
Are their cultures too dissimilar for it to work out in the long term, or does the fact that both companies are big and bureaucratic give them a chance of learning how to work together?
The surprise candidate, at least to me, is Actavis. What I find curious is that 12 months ago, when it became clear that Ratio was being offered for sale so was Actavis on the basis, as I understand the situation, that it had more or less run out of funds following the Icelandic financial crisis.
How, then, is it not only back on its feet but also in a position to consider spending a few billion euros on buying Ratio? Will it really be able to match Pfizer’s reported US$4bn offer?
Reports from the Wall Street Journal suggest that Actavis is in fact cooperating with its largest creditor Deutsche Bank to put together a deal. The suggestion is that Deutsche Bank only agreed to finance the deal because it hopes that, by merging with Ratiopharm, Actavis may reach a position where it is able to repay the roughly 4 billion Euros that it already owes the bank.
A wise investment or throwing good money after bad? If the latter, it could be an extremely expensive mistake for Deutsche Bank, but then banks have recently proved themselves extremely skilled at making expensive mistakes!
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