$6.3 Billion: Pharmaceutical Manufacturer STADA Disappears Behind The Curtain Of Private Equity… — John G. Baresky

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Bain Capital and Cinven take STADA behind the private equity curtain

Bain Capital And Cinven Team Up To Acquire One Of Europe’s Largest Generic Drug Producers…

…Private equity (PE) continues to be a force in changing the face of the global healthcare industry…

STADA, a prominent generic drug manufacturer based in Germany, was taken off the publicly-traded market in August (8/18/2017) in a $6.3 billion private equity deal. Two private equity leaders, Bain Capital and Cinven, were the buyers. Global consolidation in the healthcare industry has been rampant and the generic drug producer sector is not immune to it. The STADA deal has been overlooked by many in the healthcare industry and investor community; it is an assertive play with positive direction in its future.

…As noted in The Pharmacy Times, industry-wide pricing erosion has put generic players on the lookout for accelerating deflation; many generic drug manufacturers are bulking up in size as a defense against pricing pressure and looking at strategic mergers and acquisitions to drive growth…

Image of Stada Headquarters
Image of Stada Headquarters

Multiple Options…

There are two key considerations in this deal. First, it is the largest private equity deal to date for a German-based company. Second, it could be the stepping stone to another PE deal. French pharmaceutical manufacturer Sanofi has plans to sell its European generic drug unit soon. It may be a fitting asset to be combined with STADA. Bain and Cinven would have a formidable generic manufacturing organization in their portfolio which they could cultivate for income, a spin-off in a public offering or sell directly to a pharmaceutical manufacturer.

…Founded in 1984 and based in Boston, Massachusetts, Bain Capital, LP is one of the world’s leading private multi-asset alternative investment firms with over $75 billion of assets; Cinven is a private equity firm founded in 1977 and based in London, United Kingdom…

While they could do this based on the STADA deal alone, bolstering it with Sanofi’s generic unit would make it larger and potentially that much more profitable in any of the three options. The tandem would allow for a larger product portfolio for competitive marketing purposes against other generic drug makers along the way.

…In the U.S., generic drugs average about $18 per prescription and account for 89 percent of all retail prescriptions and 49 out of 50 prescriptions where generics exist as substitutes for brand drugs; because retail pharmacies annually dispense four billion generic prescriptions, 11 million every day, spending on generics account for 2.7 percent of total health spending based on findings from the Brookings Institute…

…According to a GAO report ( General Accounting Office, U.S. Federal Government), generic drug prices have been falling in the United States since at least 2010…

Looking Ahead, STADA Provides The Right Investment For Bain And Cinven To Build On

Additional gains may be realized through the inevitable cost-cutting measures applied to each organization. Conceivably, the STADA deal may drive the price higher for the Sanofi unit if it is a pivotal target in Bain Capital and Cinven’s strategy. Sanofi may be able to extract more payment from them or other drug manufacturers seeking to buy the Sanofi unit. Healthcare continues to be a sector ripe with mergers and acquisitions; both public and private monies are being strategically exercised to gain maximum short and long term advantages. Bain and Cinven’s STADA deal has the makings of a lucrative sales/profit platform and long term commercial strategy in the pharmaceutical industry.

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Hi, my name is John Baresky ( pronounced “ buh — ress — key “) and I have over 25 years of experience in healthcare.

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