Brazil Report: A Bold Player Blooms - Pharmaceutical Executive

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Brazil Report: A Bold Player Blooms


Pharmaceutical Executive


CONSOLIDATION NATION


Top 25 Breakdown: More than meets the IMS Data
Providing her a helpful example will be the pharmaceutical industry's consolidation, plowing ahead in full force. Significant M&A activity in the past year includes MNCs like Amgen, Pfizer, and Sanofi, as well as domestic firms like Hypermarcas, which made 10 acquisitions in 2010, and acquired Mantecorp (a top 5 domestic player) for US$1.5 billion. Perhaps no one else is better qualified to speak on Brazilian consolidation than Claudio Bergamo, CEO of Hypermarcas, Brazil's largest consumer goods company, which with an annual turnover of over R$5 billion (US$2.86 billion), more than any of its national or international competitors in the country. Speaking about the pharma sector, Bergamo says, "Historically, the market was very fragmented, with more than 50% of total market in the hands of Brazilian companies. Hypermarcas saw the opportunity to consolidate many successful family owned companies that were going through succession issues. Previously, these companies competed against each other, not taking advantage of the synergies that would have existed if they were grouped under the same platform."

Bergamo has fostered this platform in Hypermarcas' rapid ascent, which has seen close to 25 acquisitions since April 2008, when it became public. He has continued to further develop many of these companies—and together they have the country's largest number of product launches, supported by "heavy investments on field sales forces, efficient operations, strong distribution, and demand generation," Bergamo says. Now, however, with an average industry EBITDA hovering at 20, he is easing up on the buying spree. "There are still some opportunities remaining for further consolidation, but we do believe we have acquired the best assets available in the last years.


Alexander Triebnigg, president, Novartis
Hypermarcas M&A strategy was to acquire the best companies, which could be further developed—and not 'bargain' situations. Nowadays, if you go into a drug store, there is not a single section where Hypermarcas doesn't have a product—diapers, cosmetics, men's and women's care etc—extending through OTC and generics. And, in many of these markets, we have relevant market shares and leadership positions," Bergamo notes, and highlights the company's dominance: the best portfolio of businesses and brands in all major relevant markets, being the No. 1 in OTCs, No. 1 in branded generics, No. 2 in Rx, No. 2 in dermo-cosmetics, No. 1 in condoms, and No. 1 in sweeteners, among others.

Eyeing the Top 25 players in Brazil (refer to chart on page S12. This retail data; granular hospital records are not kept), one sees familiar faces: Sanofi, Novartis, GSK, Pfizer—although none of these is ranked at or above its global position. But the real story is the rapid advancement of local players like Neo Quimica (No. 7), Teuto (No. 13), Germed (No. 24), and LeGrand (No. 21); the continued independence, despite acquisition attempts, of some of its marketshare leaders such as Cristalia and Mauricio Billi's Europharma; and the surprising dominance of domestic firms, as well as the fact that few remain independent. EMS's lead is even more dominant than a No. 1 position for the last five years suggest; Germed and LeGrand are both brands of EMS. Hypermarcas acquired Neo Química in 2009, and owns Mantecorp (No. 20), while Sanofi now owns Medley (No. 2), and Sandoz (No. 16) is, of course, under Novartis. With further "pharmarriages" likely in the works, this list will become even smaller—and even more inbred.


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