Stada leaps on Teva bid rumour

Related tags Novartis

Shares in German generic drugmaker Stada rose last Friday after
rumours resurfaced that Israeli company Teva Pharmaceutical
Industries was gearing up to launch a €2 billion bid for the
company.

The stock rose sharply despite denials from Stada that it had started to actively seek a buyer for the business, as reported in the Suddeutscher Zeitung newspaper.

In a statement, which stopped short of denying any knowledge of a Teva bid, the German company said: "Today it is stated in several press reports that Stada has assigned a mandate for the search for a buyer of the company. These reports are not correct and do not have any basis."

Investors have been waiting for a bid for Stada ever since its German peer Hexal was bought by Swiss group Novartis, whose Sandoz subsidiary is currently jostling with Teva for the number one spot in the generics market. Novartis' acquisitions of Hexal and a stake in US firm Eon labs will see it vault over Teva - which wrested the top spot from Sandoz via its $3.4bn acquisition of Sicor last year - into first place.

Along with Teva, France's Sanofi-Aventis, US group Johnson & Johnson and Germany's Merck KGaA have also been linked to Stada, which earlier this year predicted hat both sales and earnings wills see double-digit increases this year with group profit forecast to exceed €60 million.

After the Hexal acquisition was announced, Bernd Wegener, president of the German drug industry association, the BPI, said he though this was just the start of consolidation in the German generics sector, as drugmakers have recognised the enormous sales volumes available to generics firms through patent-expired products. The trend is reinforced by government pressures on doctors to prescribe cheaper drugs. Generics accounted for 54 per cent of German drug sales by volume last year.

He said it is likely that smaller drugmakers will become acquisition targets, singling out Stada, which had a difficult 2004 as a result of Germany's compulsory 16% drug discount regime but is now expected to do better as patent expiries mount and generics' prices increase. Another takeover target is thought to be Betapharm, sold by Hexal to the 3i group.

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