Schweizerhall moves further into generics with Novosis acquisition

By Gregory Roumeliotis

- Last updated on GMT

Related tags Pharmacology

Looking for an advantage in the high-value generics market and a
boost to its contract development services for research-driven
pharmaceutical companies, Swiss chemicals and pharmaceuticals group
Schweizerhall has bought German drug delivery firm Novosis in a
deal worth up to €82.6m.

A particular attraction of Novosis is a full pipeline of new products scheduled to reach the market over the next few years as well as drugs already in the market performing strongly such as transdermally delivered Fentanyl patches for the treatment of chronic pain.

Among the most advanced projects in the R&D pipeline of Novosis are transdermal systems for contraception, the treatment of central nervous system diseases, novel patches to relieve pain as well as biodegradable implants for the treatment of prostate cancer.

This makes Novosis an important player in the therapeutic patch market, estimated at approximately €3.3bn with an annual growth of around 12 per cent.

The company also boasts developing and manufacturing contracts with pharmaceuticals and generics companies such as Schering, Sandoz/Novartis and Ratio-pharm.

Thus, Schweizerhall saw Novosis as a gateway to value added generics where margins are better and barriers to entry higher than the classic generic business.

Schweizerhall used to be exclusively a trader and distributor of chemical raw materials, intermediates, specialty chemicals and customised mixtures but moved into the European generic pharmaceutical industry last year with the acquisition of Cimex.

Driving this effort to reduce reliability on its chemical unit were high raw material prices, weaker demand from customers and competition from low-cost suppliers in the Far East.

"We see our chemicals unit as a lean cash cow that we will milk as much as we can to finance our entry into the pharma business,"​ Schweizerhall chairman Luzi Andreas von Bidder told​.

"We are extremely bullish about the generics market, we have already moved to patches, which is obviously a more challenging area, and we aim to go into injectables next."

The generic industry is expected to grow by roughly 13 per cent in 2006 with drug patents expiring this year valued at €18bn.

Combining the technological know-how in both the development and manufacturing of oral formulations at Schweizerhall with the expertise of Novosis in transdermal and implantable drug delivery systems will better position the two companies to cash in on the opportunities available in Europe.

"Our goal with this transaction is two-fold,"​ said Wilfried Fischer, founder of Novosis, who will keep his job as chairman.

"We want to secure financial resources to fund our R&D activities and also to achieve a good return for the financial investors who have supported us during the start-up phase of our company."

For the takeover, Schweizerhall will pay by the end of May €26.6m in cash and €8.3m in newly issued Schweizerhall shares to Novosis, and, depending on the achievement of financial earnings and R&D milestones, a second payment of between €9m and €47.7m will be due in the first quarter of 2008.

Novosis, a privately held company, expects earnings before interest, taxes, depreciation and amortisation (EBITDA) of €4.8m for 2006 and forecasts rapid and profitable mid-term growth based on the market introduction of new products.

At its annual general meeting on April 28, Schweizerhall will seek approval to create 300,000 shares and part of the authorised capital will be used to reimburse Dr Fischer.

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