Biolab enters generics and evaluates purchase in Canada
ECONOMIC VALUE | 04/07/2018
One of the largest nationally-owned pharmaceutical companies, Biolab has just entered a new market, generic drugs, with a turnover forecast of more than R$ 150 million in 2019. On its way to opening a R$ 450 million plant in Pouso Alegre (MG), the company is also making its debut in the central nervous system (CNS) area and has been looking at assets for sale in Canada, to potentially establish its first production unit outside Brazil.
Biolab's entry into generics and CNS stems from the purchase of Actavis Brasil, which belonged to Israeli Teva, the world's largest generics manufacturer. The value of the deal, concluded last week, has not been disclosed.
Valor found, however, that in the industry, it is estimated that Biolab would have paid between R$ 40 million and R$ 60 million for the operation, which includes a factory in Rio de Janeiro and a portfolio of 30 products.
Actavis' turnover last year is estimated at around R$ 50 million.
"We're going to play in generics, but without giving up Biolab's DNA, which is innovation," said the president and one of the controlling shareholders of the pharmaceutical company, Cleiton de Castro Marques. With the transaction, Teva, which has not managed to consolidate itself as a relevant competitor in generics, will limit its operations in the country to oncology and special treatments.
Facing a serious financial crisis since the purchase of Allergan's generics division for around US$ 40 billion, the Israeli company has put assets up for sale and cut thousands of jobs. The Rio plant was not included in the divestment plan and the Brazilian pharmaceutical company took the initiative to talk to the Israelis.
Biolab was particularly interested in the portfolio of branded medicines registered with the National Health Surveillance Agency (Anvisa) and not yet on the market - generics were not the Brazilian company's focus. According to Marques, these are products with a high regulatory barrier, without a patent and with no more than one competitor, which will be offered on the public market and in pharmacy chains. For strategic reasons, these molecules have not yet been revealed. "There are at least six molecules that will be produced here," he said.
Talks between Biolab and Teva began in January and by April there was already a formal agreement, the businessman told Valor. Precedent conditions were met and, on Monday, the Brazilian pharmaceutical company took over the Actavis operation. In the generics market, the strategy will not be to compete directly with the big players in this segment, such as EMS, Hypera and Medley (owned by the French company Sanofi). By next year, the portfolio should consist of 60 products, which together could account for 15% of Biolab's turnover.
"Generics are a reality in the Brazilian market, so we have to work on that too. We're going to dilute production costs," said Marques, when asked about the factors that led Biolab, a pharmaceutical company traditionally focused on higher prices and premium products, into a segment marked by strong competition and high discounts.
The big attraction lies in the other portion of Actavis' products, which will allow Biolab to enter with a more robust portfolio in the central nervous system, an area that was already on its radar. The pharmaceutical company's long-term strategy is based precisely on branded products and new molecules that may be developed at the research and development center recently set up in Canada.
At the moment, Biolab - a nationally-owned laboratory - is investing R$ 450 million in a new factory in Pouso Alegre (MG), which will double its production capacity, which currently stands at 100 million units per year. In terms of expansion, however, the next step will most likely be abroad. "The next step should be a factory in Canada," said Marques. "We're already looking at assets."
In addition to potential acquisitions, the pharmaceutical company has two major internationalization projects already planned, said Marques. The first is the launch of Vonau (ondansetron), for the treatment of nausea and vomiting, in Peru, Ecuador and Colombia, and registration in Mexico and Saudi Arabia (which opens the door to countries in the Arab community).
The second is the launch of dapaconazole, an antifungal developed entirely by Biolab and the result of radical innovation. The intention is to sell the drug, which is currently being registered with Anvisa as a topical version, also in the Asian and Latin American markets and in Canada. "We're very open," commented Marques, referring to talks with potential distribution and co-development partners.
Last year, Biolab had net sales (after tax) of R$ 1.3 billion and, before the truckers' strike, was projecting an expansion of 12% for 2018. At the moment, an advance of 10% seems more feasible, notes Marques. "May got in the way a bit," he comments. The pharmaceutical company is the leader in medical prescriptions in the cardiology area, which accounts for around 50% of its turnover.
At the same time as strengthening its portfolio, Biolab is making profound changes to its governance, with the support of McKinsey.
The three controlling families - Cleiton and his brother Paulo de Castro Marques and Dante Alario Júnior - were brought together in a family council and a board of directors was set up, with seats occupied by the three partners and two independent members. The intention is to prepare the company for a future succession process and, eventually, access to the capital markets, including an initial share offering, should any business opportunity arise that justifies such an initiative.