Make or break time for SMEs

by emma 11. November 2011 11:13

Make or break time for SMEs

New research shows that SME growth provides the best prospect for economic recovery in the UK. But, as private equity firm ECI notes, finding the cash to reach out to global partners and markets can be a critical hurdle.

With continued pressure on governments across the Western world to reduce their expenditure, together with sustained macro-economic uncertainty and a tightening of bank funding, times are not necessarily easy for the average healthcare company – which often relies on the public purse for reimbursement and debt funding for growth. One might therefore expect the short-term outlook for growth to be somewhat muted, despite the backdrop of positive longer-term demographic drivers of demand.

Hence it is interesting that a recent survey of UK SME businesses by ECI Partners, a UK-based midmarket private equity firm, has found executives to be generally positive about growth prospects over the next 12 months, with 74% of respondents anticipating headcount growth and 60% expecting double-digit turnover growth.

The results met with a warm response from the Government, with Mark Prisk, Minister of State for Business and Enterprise, saying: “It’s good news that despite a tough few months, nearly three-quarters of the SMEs surveyed by ECI are looking to recruit over the next year and half expect to see substantial profit growth in that period. Up and down the country, it is Britain’s SMEs that are driving our economic recovery.”

Reaching out

This year, the survey conducted each summer by ECI Partners gained responses from a total of 246 chief executives from UK growth companies from a range of sectors with turnover between £10m and £200m. The results paint a positive picture against the gloomy economic backdrop of the Eurozone crisis and sluggish UK economy, and suggest that there remains growth potential amongst SME businesses – which account for around a third of UK private sector employment.

Steve Tudge, a Managing Director of ECI, commented: “Despite the barriers to growth, which are principally cited as a weaker macro-environment and funding constraints, we continue to be optimistic about the prospects for good mid-market companies.”

Executives see the key growth drivers to be increasing international sales – with Europe and the USA remaining the dominant international markets, though India and China are becoming more important – and organic growth through investment in sales and marketing and new product development. Over 40% of companies are also planning to increase their use of overseas suppliers to improve their margins.

Internal cash flows are viewed as the most likely source of funding for this growth, though around half of respondents say they are likely to seek bank debt within the next 12 months (despite continued complaints about its cost and due diligence requirements) and around 40% are also likely to look at private equity backing. Fewer than 10% of companies see the public markets as accessible, perhaps reflecting the recent volatility and liquidity issues associated with the AIM market.

Healthcare respondents are less bullish about high growth than their peers in other sectors, and are noticeably less positive about growth than they were last year. This no doubt reflects, in part, the political uncertainty surrounding the current UK healthcare reforms and the public sector spending constraints that are impacting on the health and social care sectors.

Despite this, companies remain more confident of raising growth financing – and of raising it from private equity firms, with over 50% saying that was a likely consideration over the next year.

Financing growth

What does all this mean for SME healthcare businesses in the UK? The sector certainly faces challenges in responding to Government spending cuts, which are tending to put pressure on margins if not always on volumes.

However, opportunities for growth remain amidst these challenges, particularly for companies who are able and willing to venture beyond the UK in order to seek new customers and cheaper suppliers.

Of course, this internationalisation can put a strain on smaller businesses, which may lack the scale to fully support an international infrastructure. Private equity groups with experience and expertise in this process can potentially offer support to management teams in this position – whether by making introductions, sharing best practice or simply financing the required infrastructure.

There are significant sums of capital available for investment from the UK private equity industry, and there remains an appetite to invest in market-leading healthcare businesses. Thus private equity should be considered seriously as an option by management teams in the healthcare industry who are looking to fund growth to help their companies succeed in the current economic environment.

ECI is a private equity group that has been investing in mid-market growth businesses for over 35 years. It invests across sectors, with a focus on UK and Irish companies. Healthcare companies in its current portfolio include a primary care provider (Harmoni), assisted living specialists (Premier Bathrooms, DLP) and medical software companies (Clinisys, Ascribe).

Lundbeck continues momentum

by emma 9. November 2011 13:48

Pharma Industry News

Revenue was up 10% in Q3 at Lundbeck to DKK 4.9 billion but profit from operations fell nearly a quarter (22%) after restructuring its R&D department.

Growth was driven by an increase in revenue from a number of its key products and milestone payments following the launch of escitalopram in Japan.

Ulf Wiinberg, Lundbeck’s President and CEO, says the company is “very pleased with yet another strong quarter” after its branded products delivered “solid results”.

Sales of Sabril increased by nearly half (47%) to DKK 77 million, compared to the third quarter in 2010, with revenue also up for Xenazine in the US by a fifth, compared with the same period, to DKK 191 million.

Lundbeck’s key products, Cipralex, Ebixa and Azilect, which grew 5%, 18% and 20% respectively, compared to the period last year, helped boost revenue from International Markets up 20% to DKK 901 million.

“We are now entering a new era with many new product launches,” said Ulf Wiinberg. “With the launch of Lexapro in Japan, the continued roll out of Sycrest and the forthcoming launch of OnfiTM in the US, we have expanded on our product diversification and strengthened our long term growth prospects substantially.”

Jobs expected to go at Teva

by emma 9. November 2011 11:43

Pharma Industry News

Between 1,000 and 1,500 jobs are expected to be lost at Teva Pharmaceutical Industries as part of the company’s cost-cutting measures.

Reports from Israel claim the majority of the layoffs will be made in the US and Europe and mainly focused in Teva’s recently acquired Cephalon’s generic business.

The reports say that Teva is hoping to raise $500 million in synergies from its takeover with job losses expected to raise the majority of its target.

Teva has already said it is planning to cut sales, marketing and administrative expenses by $300 million, R&D by between $120 million and $150 million, and production costs by $50 million to $80 million. R&D savings would be achieved by cutting duplicate operations, the company said.

Teva has a history of job losses following takeovers of generic companies. In 2008 it bought US generic specialist Barr and reduced its workforce by 10%, reports say.

A reduction of 1,000 jobs at Cephalon would represent a loss of 27% roles before the takeover. But one company where job losses will be made, the reports say, is at Mepha, the Swiss generics manufacturer Cephalon bought last year. The company had 620 jobs prior to the acquisition.

Takeda restructures business operations

by Emma 8. November 2011 15:53

 

Takeda Pharmaceutical Company has created several new positions as part of its “Transformation into a New Takeda”, restructuring the company’s business operations.

The new roles include Chief Medical and Scientific Officer (CMSO) and Chief Commercial Officer (CCO).

The CMSO is set to replace the existing post of Chief Scientific Officer, to be filled by board member Dr Tadataka Yamada, a medical doctor and scientist with strong experience in pharmaceutical R&D.

The CCO will be responsible for the company’s global sales structure, replacing existing positions in International Operations in the US, Europe and North Asia.

Takeda’s Chief Executive Dr Frank Morich will claim this position, who will lead sales strategies in the US, EU and key emerging markets.

The restructuring of the company is said to relect Takeda’s recent acquisition of Nycomed, which the firm described as “another significant step towards globalisation”.

Takeda fully acquired Nycomed in October in a cash deal worth €9.6 million.

GSK pays $3b in criminal and civil settlement

by emma 3. November 2011 15:38

Pharma Industry News

GlaxoSmithKline (GSK) has agreed to pay $3 billion to settle US criminal and civil investigations into whether the company illegally marketed drugs and other matters.

The investigations include a Department of Justice review of the UK company’s controversial diabetes drug Avandia, which has been linked to heart risks.

The settlement follows clampdowns since the late 1990s in the US on unfair pharmaceutical industry practices that may have prioritised sales targets over payer and patient interests, such as marketing drugs for unapproved uses.

Andrew Witty, CEO of GSK, said: “This is a significant step toward resolving difficult, longstanding matters which do not reflect the company that we are today.

“In recent years, we have fundamentally changed our procedures for compliance, marketing and selling in the US to ensure that we operate with high standards of integrity.”

Mr Witty said that the company has put in place a new bonus system for US sales, which no longer focuses on individual sales goals, but is now based on selling competency, customer evaluations and overall performance of the sale representative’s business unit.

Federal prosecutors began investigating GSK in 2004, into whether the company promoted drugs for unapproved indications, and into cases where the company may have potentially influenced doctors.

The inquiry involved nine of the company’s best-selling products from 1997 to 2004, including lung therapy Advair.

Gbola Amusa, an analyst at UBS AG in London, said: “This news essentially draws a line under a 10-year legal saga.”

Both civil and criminal settlements are expected to be finalised in 2012.

Stable sales at Sanofi

by emma 3. November 2011 14:27

Plavix

Sales increased more than 10% at Sanofi in the third quarter to €8.7 billion, despite the loss of €471 million due to generic competition compared to the same period a year ago.

Total sales grew 10.1% along with an 11% increase in growth platforms after strong performances in its diabetes, vaccines and consumer health divisions.

Christopher A. Viehbacher, Sanofi CEO, says the return to growth in sales and earnings is an “important milestone as the company progressively puts the patent cliff behind it”.

Growth platforms and Genzyme accounted for 68.5% of total sales after the recently acquired business recorded sales up 6.9% to €768 million.

Pharmaceutical net sales were up a tenth to €6.9 billion and helped year-to-date net sales rise 5.5% to €20 billion, despite generic competition to Lovenox, Ambien CR and Taxotere in the US and Plavix (pictured) and Taxotere in the EU plus the impact of US healthcare reform and EU austerity measures.

Its diabetes division was driven by a strong US and Emerging Markets performance which resulted in a 12.4% increase in sales after Lantus recorded growth of 14.6% and 23.4%, in respective markets. Growth in Sanofi’s vaccine division also increased 16.7% after a solid demand for seasonal flu medication in the US.

The Sanofi Group now expects 2011 business net income to be between 2%-5% lower than last year’s total. “We continue to make strong progress in R&D with the submission of five new products and also in the tight control of our costs,” said Mr Viehbacher.

It was reported this week that Sanofi is set to overtake Pfizer as the world’s biggest pharmaceutical company by 2016.

Submissions have been recently filed for Lyxumia (lixisenatide) in the EU, Aubagio (teriflunomide) and Zaltrap (aflibercept) in the US; Visamerin/Mulsevo (semuloparin) in the US and EU; plus Kynamro (mipomersen) in the EU.

The company released its Q3 performance on the day it announced it was cutting jobs in its US R&D and sales divisions.

Hundreds of sales and R&D jobs cut at Sanofi

by emma 3. November 2011 11:15

Pharma Industry News

Sanofi plans to cut hundreds of jobs in its sales and R&D departments in the US over the coming months.

The job losses come as the company prepares to lose patent exclusivity on key products and fully absorbs Genzyme following its acquisition in February 2011.

The sales jobs cuts would be focused on Sanofi’s cardiovascular and oncology groups, aiming for cost savings of $2.9 billion per year, said CEO Christopher Viehbacher.

More than 9,000 jobs have been cut at the company over the last several years, including approximately 3,800 sales employees in the US.

The staff reductions in mature markets have been similar at many other pharmaceutical companies, adding vacancies in emerging markets.

According to Mr Viehbacher, Sanofi has added more than 3,700 pharmaceutical jobs in emerging markets since 2008.

Sanofi overtakes Pfizer as world’s biggest drug company

by emma 1. November 2011 12:50

Pharma Industry News

Sanofi is expected to overthrow Pfizer’s nine-year reign as the world’s biggest drug maker, according to new research.

The French pharmaceutical company is expected to retain the top spot until at least 2016, with Pfizer falling to third place behind Novartis due to the loss of Lipitor’s US patent protection, according to EvaluatePharma (see figure one).

The report says that Sanofi’s numerous acquisitions over the last decade have contributed largely to the company’s success, gaining $20 billion after it bought out Genzyme.

Sanofi’s mergers over the last decade have contributed a great deal to its current position, starting with its $30 billion deal with Synthélabo in 1999.

It is expected that the company will retain its top position until at least 2016, mainly thanks to sales of enzyme replacement therapies through its acquisition of Genzyme.

Also, the company’s addition of Cerezyme and Myozyme blockbuster drugs will help fill the gap left by Lovenox, Taxotere, and Plavix, which loses US patent protection in 2012.

Pfizer’s $68 billion buyout of Wyeth in 2009 helped fill the gap left by Lipitor, but it will be difficult to replace the drug’s global sales figure of $13.4 billion seen in 2008, which set the record as the biggest selling medicine.

Following its loss of US patent protection in November 2011, Lipitor sales are estimated to shrink to $2 billion by 2016.

However, pipeline products such as rheumatoid arthritis (RA) pills tofacitinib and Eliquis are expected to boost Pfizer’s drug sales after 2016, which will help retain the company’s position in the top-five pharmaceutical companies.

Merck’s four-year outlook is seen as bleak despite its takeover of Schering-Plough for $41 billion in 2009, with only 1% annual sales growth predicted, conceding to European companies GlaxoSmithKline and Roche to overtake the company.

EvaluatePharma predicts that Johnson & Johnson’s recent pipeline successes will benefit the company in the coming years, despite its drugs arm being substantially smaller than the five biggest pharma companies.

It is thought that Novartis will be Sanofi’s closest competition over the next few years, with strong sales growth from Gilenya and Tasigna due to Diovan’s loss of patent protection next year.

Figure 1:

World's top 15 pharmaceutical companies

Profits up 12% at Novo

by emma 31. October 2011 14:05

Victoza

Novo Nordisk has increased operating profits by 12% in the first nine months of the year after sales growth rose due to the performance of Victoza (pictured), NovoRapid and Levemir.

Sales of modern insulins increased by 11% after Victoza sales nearly DKK 3.9 billion which resulted in net profit jumping nearly a fifth (19%) to DDK 12.4 billion.

Lars Rebien Sørensen, President and CEO, says Novo is “pleased” to see its key products “drive strong underlying sales growth”.

The Danish-based company has now updated its outlook for the year and expect sales growth to be between 10%-11% and operating profits growth be in the region of 17%-19%.

In North America sales increased by 17% and in other International Operations by 16%. Gross margin improved by 0.2% which Novo says reflects a favourable product mix development due to an increase in sales of modern insulin versus lower human insulin sales.

Regulatory dossiers for the company’s new generation of insulins, Degludec and DegludecPlus, were also submitted to the European and US authorities in September. “The filing of our new-generation insulins, ultra-long-acting Degludec and DegludecPlus, in the US and Europe is a major milestone in the expansion of our leadership in diabetes care."

Novo has now adjusted its preliminary outlook for next year which indicates a high single-digit sales growth and an operating profit increase near 10%.

The company increased its operating profit by nearly a third in 2010.

ViroPharma buys DuoCort

by emma 31. October 2011 11:32

Pharma Industry News

ViroPharma has signed a definitive agreement to acquire Swedish-based DuoCort Pharma AB for an initial $33.6 million – but only if Plenadren is approved by the European Commission (EC).

Under the terms of the agreement, the deal will be closed after the tablet’s approval, after the EC’s confirmation of Plenadren’s orphan drug designation, and an amended agreement with the product’s contract manufacturer.

Vincent Milano, ViroPharma's President and CEO, says the deal is in line with the company’s “objective of broadening our orphan drug portfolio”.

Further milestone patients of up to $131 million associated with manufacturing, sales thresholds and territory expansion have also been agreed as part of the acquisition.

Plenadren is a once daily dual-release oral glucocorticoid tablet with a release profile designed to closely mimic the body's natural secretion pattern of cortisol. ViroPharma now anticipates the commercial launch of the treatment – which it says will be the first “true innovation in over 50 years” – of adrenal insufficiency in the EU within a year. It estimates that peak annual sales for Plenadren could reach up to $50 million.

The Committee for Orphan Medicinal Products confirmed in September that Plenadren’s orphan designation would be maintained and protected for a decade of market exclusivity.

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