Romania is the target: Big pharma and private equity firms seek high profits in Eastern Europe – News by sources

In the race to supply vaccines to combat the COVID-19 pandemic, US drug manufacturer Novavax has headed to emerging Europe to accelerate production with more transactions in addition to the consolidation trend in the region, Reuters reports.

In these transactions, which were stimulated by a combination of private equity firms and those in the big pharma sector, Novavax bought the Praha Vaccines plant near Prague in May last year for $ 167 million. He later entered into a partnership with the Polish biotechnology company Mabion.

The American company has decided that the Praha Vaccines plant is the best solution to increase its vaccine production in Europe, said spokeswoman Laura Keenan, adding that “talent in the region was one of the important factors that were taken into account. “.

The pharmaceutical industries in the Czech Republic, Hungary and Poland are far outnumbered in Germany, but analysts believe there is room for growth in terms of moderate costs, forecasts of rising health spending and the educated workforce.

For private equity firms, Eastern Europe is attractive because it allows large profits while big pharma can reduce its costs by taking over growing firms that have already invested in research. In addition, the fact that they are member countries of the European Union means that they meet internationally recognized standards.

According to a study by the consulting firm Mergermarket and Mazars, the total value of transactions in the health and pharmaceutical industry concluded in Central and Eastern Europe has doubled in 2020, to 1.9 billion euros, from 923 million euros in 2019.

“Even without COVID-19, economic and demographic trends in the region show an increase in activity in the sector. As populations age and incomes grow, investors will continue to see benefits in strengthening the industry to reduce costs and gain market share. “, is shown in the report of the consulting company.

One of the most active in the consolidation process was the Czech company Zentiva, which last year took over Alvogen’s business in Central Europe from the private equity firm CVC Capital Partners.

“Consolidation in our region is certainly inevitable,” said Krzysztof Krawczyk, a partner at CVC.

For drug manufacturers, small innovative companies have a special appeal. “It is easy for companies with a strong presence in the mainstream market segments to buy an innovative biotechnology company and thus avoid the research and development phase in order to rapidly expand their product range,” says Krzysztof Krawczyk.

A similar opinion was expressed by Adam Pietruszkiewicz, a member of the board of the Polish biotechnology company Mabion, and a partner in the investment firm Twiti Investments. “Most likely, the more such companies and start-ups appear, the more transactions there will be,” says Adam Pietruszkiewicz.

For now, the 1.9 billion euro transaction through which the Sanofi group sold Zentiva to the American equity fund Advent in 2018 is one of the largest transactions in the region. Meanwhile, Zentiva has made two more acquisitions in Emerging Europe and is currently analyzing the region for other possible acquisitions, said EEC Business Director Hacho Hatchikian.

Data published by the European Federation of Pharmaceutical Industries and Associations (EFPIA) show that the value of medicines sold on the market of 38.5 billion euros in Germany is almost three times higher than that of the markets in the Czech Republic, Hungary and Poland combined. But the gap is expected to narrow as health standards in Eastern Europe converge on those in the West.

“EEC markets offer significant growth prospects as they follow a clear path of convergence towards Western European and US standards in terms of both treatment options and health spending,” said Hacho Hatchikian.

In Romania, the drug manufacturer Zentiva achieved a turnover of 163 million lei for the first three months of the year, 6.5% more than in the same period of 2020. Sicomed was established in 1962 as the Drug Enterprise Bucharest (IMB) and since January 2006 the company has changed its name to Zentiva SA.

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