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Specializing is Swedes’ strategy
STOCKHOLM, Sweden—Targeted toward enlarging its U.S footprint and expanding its therapeutic focus to gastroenterology and women's health, global giant Meda has signed an agreement to acquire Alaven, a Marietta, Ga.-based specialty pharmaceutical company known for its diversified product platform.
The $350 million transaction is on a cash and debt-free basis, fully financed by Meda's existing credit facilities. The deal is expected to close by this month, pending standard closing requirements and antitrust clearance from the U.S. Federal Trade Commission.
Meda CEO and president Anders Lonner believes Alaven's products and business model are very similar to Meda's.
"The acquisition of Alaven enables our operations in the U.S. to become stronger and more profitable by taking advantage of cost and marketing synergies," Lonner stated in a news release. "It is not easy to find U.S. specialty pharma companies of this caliber. Therefore, we are very pleased."
Anders Larnholt, Meda's vice president of corporate development and investor relations, says Alaven is a good fit for Meda's future strategic plans, strengthening the Swedish pharma's toehold in the strategic U.S. market, thus enhancing its marketing capabilities in the states. Meda will also be able to take advantage of Alaven's strategic over-the-counter (OTC) platform that accounts for approximately 25 percent of sales, Larnholt says.
"Alaven adds strong knowledge and an important platform in two new therapeutic areas (gastroenterology and women's health) to Meda's existing U.S. operations," Larnholt says. "Meda already operates in these new areas outside of the U.S."
It is too soon to speculate on the fate of Alaven's 180 employees, of which 150 are dedicated to marketing and sales, he says. All manufacturing is outsourced to third parties.
In Meda's 2009 annual report, Lonner mapped out the company's acquisition strategy: "Efforts in 2009 were aimed at integrating companies and products acquired in 2008 and registration and launch of new drugs in Europe and the U.S. The efficient integration of Valeant's European pharmaceutical operations and the Roche product portfolio exceeded expectations and rewarded us with significant synergies."
Cash flow was strong during the year, and net debt decreased gradually, "which strengthened Meda's financial muscle and, by extension, increased its commercial
freedom," Lonner said. 2009 was also the year when Meda took the definitive step to becoming a leading player in the international specialty pharma market.
"Relative to its size, Meda has one of the widest international footprints in the industry, with its own sales force in 50 countries and sales in more than 120," Lonner said. "In parallel, we continuously evaluate acquisitions of companies and products. As its international presence is strengthened, Meda is becoming an increasingly attractive partner for research and development companies preparing for global commercialization of new drugs. The Meda model—streamlined administration, a highly efficient sales and marketing organization, and outsourcing of specialized services—keeps Meda agile and cost effective."
These characteristics are highly valued by companies looking for a partner, especially when their goal is to quickly reach the major markets in North America and Europe, which together represent about 70 percent of the global pharmaceutical market, he said.
"Competition in the industry is becoming fiercer every year, as reflected by the high rate of mergers and acquisitions, especially in the Big Pharma sector," Lonner said. "The same trend is occurring among niche generic companies, and signs are emerging that this may also happen among specialty pharma companies. The driving force is largely the same: economies of scale in sales and marketing."
Meda's strategy for remaining competitive "in this dynamic pharmaceutical environment is to stay active, with a priority on continued, profitable expansion," he said. "Fiscal 2010 will be shaped by new product launches and a stronger pipeline, accompanied by the challenges of greater price competition for certain major products."
The latest additions came early in 2010, when Meda acquired exclusive rights to Xerese from Medivir AB, a Swedish research company, and to Ceplene from U.S.-based research company EpiCept Corp.
"Meda's expansion strategy—through acquisition-driven and organic growth via market-adapted product development—remains highly relevant for the future," he said. "Acquired companies are immediately integrated into the Meda Group organization and mature and specialist product acquisitions are transferred directly to the corporate product portfolio."
Alaven's business philosophy "is to utilize a lean operating structure and outsource or partner with firms that have experience in manufacturing, formulation development and clinical trials." Bala Venkataraman, the company's president and CEO, was responsible for in-licensing or acquiring more than 15 drugs, commercializing eight products, concluding five co-promotion agreements and developing the company's product pipeline through partnerships with contract manufacturers, research organizations and drug development companies.
Among Alaven's diversified products in its portfolio are several well-known brands, including Proctofoam (rectal inflammation) its largest product, with an annual turnover of about $25 million. Other significant products include Cortifoam (ulcerative proctitis), Epifoam (primarily indicated for pain from episiotomy), Levsin (antispasmodic agent, adjunctive therapy in treatment of peptic ulcers), Rowasa (distal ulcerative colitis), TriLyte (colonoscopy preparation) and the Prefera brand of prenatal vitamins.