By PAUL WALDIE, TIM KILADZE
Thursday, February 22, 2018
Apotex Inc. is weighing a reconfiguration of its global footprint, a process that could result in the sale of its European division.
The Toronto-based company is believed to have begun soliciting bids for its European arm, which includes operations in Britain, Spain, Belgium, the Netherlands, Poland and the Czech Republic. A report in the Indian newspaper The Economic Times indicates that Indian drug giant Aurobindo Pharma is preparing an offer worth around US$100-million. Apotex spokesman Jordan Berman declined to comment on a specific sale, but he confirmed a review was underway.
"Like all generic pharmaceutical companies have been doing, we began assessing our global footprint last year to determine the optimal market mix for our operations. We consider the details surrounding any potential divestiture confidential," he said in a statement on Wednesday.
The review comes during a tumultuous time at Apotex. Company founder, Barry Sherman, 75, and his wife, Honey, 70, were found dead at their Toronto home in December and, last month, chief executive Jeremy Desai departed unexpectedly. Mr.
Sherman had been the driving force at Apotex and he was still overseeing the company's drug formulations at the time of his death.
The generic drug industry is also in a state of flux with prices falling, competition intensifying and consolidation running rampant.
One of the biggest challenges for drug makers has been the continuing efforts by governments around the world to rein in health-care spending. In Europe, government spending on drugs has dropped by 1.1 per cent annually since 2009 after growing by 1.4 per cent annually between 2005 and 2009, according to Medicines for Europe, an association that represents generic drug makers. Some analysts expect the growth rate for the global pharmaceutical industry to be cut in half over the next five years, falling from around 9 per cent annually to as low as 4 per cent.
Wholesale drug buyers have also been able to gain more clout with drug makers because of a growing number of consolidations and partnerships with major pharmacies. For example, in the United States, Express Scripts has joined the Walgreens consortium for generic buying; drug giant McKesson Corp. has teamed up with Walmart Inc.; and CVS Caremark partnered with Cardinal Health for generic sourcing.
Combined, these large buyers make up roughly 90 per cent of generic purchasing in the United States.
Skyrocketing supply has also come into focus. The U.S. Food and Drug Administration is expected to boost the number of generic drugs it approves annually for sale in order to help bring down prices. Meanwhile countries such as India, China and Taiwan have become drug manufacturing powerhouses.
Amid all of these developments, drug companies have been forced to reshape their strategies. In December, Teva Pharmaceuticals, the world leader in generic drugs, announced a major restructuring that included plans to lay off 26 per cent of its work force, or 14,000 people. In early February, the company also announced an US$11billion goodwill writedown on its American generics business, citing "continued price erosion." A recent report by rating agency Standard & Poor's said the generic industry will "remain challenged in 2018, as high-single-digit price declines on older generics will not be offset by new product launches."
In the face of these changes, Apotex had invested heavily in the United States and India under Mr. Desai. In early 2017, the Canadian company embarked on a US$184-million expansion in Florida that will house a new research and development centre and a packaging facility - its largest investment ever in the United States. And last summer, Mr. Desai opened a 42,000square-foot "global business services office" in Mumbai.
By contrast, Europe is not considered a high priority market for the company and it has recently run into trouble in Britain. Last November, Medicines and Healthcare Products Regulatory Agency, which carries out regular inspections of plants that produce medical products licensed for the British market, pulled the manufacturing certificate from Apotex's operation in India and restricted the importation of drugs made there. All European Union member states have also been told to restrict imports from the Apotex plant pending a further inspection.
Apotex has already tweaked its European footprint in recent years. In 2013, the drug maker, along with two joint venture partners, sold Italian generics producer Doc Generici to a British private equity firm in a deal reportedly valued around 300million ($467.7-million).
Pill bottles are filled at an Apotex plant in Toronto in 2011. The company is believed to have begun soliciting bids for its European arm, which includes operations in Britain, Spain, Belgium, the Netherlands, Poland and the Czech Republic.