Stada Arzneimittel (fka STDAF)

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Stada - mentioned near end of this article -

>>> Deal Boom Isn't Over for Drugmakers

http://money.cnn.com/2008/08/29/technology/biotech_demos.fortune/index.htm

By Telis Demos

August 29, 2008

NEW YORK (Fortune) -- Overall, dealmaking may be in a slump, but Big Pharma has been buying up biotech firms at a record pace – it's now the fastest-growing M&A sector, with deal value up 87% this year.

Of the 32 deals proposed in 2008, the biggest is Roche's $44 billion bid for total control of Genentech (DNA), the biotech shop of which it already owns a controlling share. Another headline grabber is Bristol-Myers' (BMY) $4.3 billion offer for ImClone (IMCL) (yes, of the Martha Stewart scandal).

The deals are a big departure from the past, when cheaply licensing a single drug was the standard. "This was unthinkable a few years ago," says Steven Wilcox, head of life sciences M&A at Ropes & Gray. "In licensing, you pay a little bit up front and a lot on the back end, but only if the drug is successful. In a merger, it's all the cost up front." That makes them more expensive and much riskier deals.

Pharmaceutical companies are spending their mountains of cash piled up from years of strong sales. Globally, the industry sold $712 billion worth of drugs in 2007. Yet the industry is expected to lose billions of dollars of revenue as top-selling drugs lose patent protection, and generic makers sweep in to sell much cheaper versions of the same drugs. The best-selling drug in the world, Pfizer's (PFE) Lipitor, generated $8.1 billion in sales in 2007 - its patent will expire in 2011. [Nitpick: the US Lipitor patent of consequence actually expires in early 2010, but PFE settled with the challenger of a separate Lipitor patent to extend Lipitor’s exclusivity to late 2011.]

Big Pharma's sales are expected to grow about 4.5% in 2008, according to S&P analyst Steven Silver, down from 6% growth last year. Shares of pharmaceutical companies trade an at average multiple of 13 times earnings, or about a 15% discount to the overall market.

That's where biotech drugs come in. First, the biotech sector promises to deliver the next generation of blockbusters. Genentech's Avastin and ImClone's Erbitux could both potentially treat dozens of different kinds of cancers, if the FDA approves their use as broadly as the companies want.

Second, biotech drugs still aren't subject to the same patent rules as traditional chemical-based drugs so generic drugmakers aren't yet a major threat. This means that biotech drugs could give drug companies predictable long-term revenues rather than relatively short-terms bursts of cash. Congress is still debating the rules on how to patent what is essentially a biological organism. According to research firm Global Insight, the FDA won't consider approving biological generics until Congress has provided guidelines. [I’m not sure what this means. Congress has to pass enabling legislation for FoB’s, but the FDA itself will write the guidelines.]

The technology to create generic biotech drugs also isn't widely available, which makes drug development very expensive. [But this is exactly why selected companies provide enticing FoB opportunities.] High costs and the prospect of new U.S. and European rules governing production and patents are driving consolidation among generic makers too. In January, Israeli generic giant Teva Pharmaceuticals (TEVA) bought Maryland-based rival CoGenesys for $400 million. Teva is rumored to be interested Germany's Stada for the same reason.

Overall, biotech sales are expected to rise 13% this year, according to health-care research firm IMS Health. Shares of biotech companies advanced 10% in the first half of 2008, compared to a 13% fall for healthcare generally.

It's no surprise, then, that Big Pharma is willing to pay hefty premiums (often 30% or more) and take on a lot of risk to get into the market. It will ensure exclusive access for them to future drug discoveries - and replenish their own dry pipelines. <<<

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Stada - buyout rumors -

>>> LONDON (MarketWatch) -- Shares of Stada Arzneimittel rose 12%after the Israeli online financial site Globes reported that Teva Pharmaceutical is in talks to buy Germany's third-largest generics maker even before the Barr Pharmaceuticals BRL) deal closes. The report cited unnamed sources and said neither company commented. The site noted that Teva's CEO Shlomo Yanay previously said that the company has been "constantly" examining possibilities in Germany, including acquisitions <<<

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>>> Teva Bid Talk Hard To Swallow

Lionel Laurent, 08.15.08, 9:50 AM ET
LONDON -

Excited investors hoping that Israel's Teva Pharmaceuticals will strike an imminent deal with German generics-maker Stada Arzneimittel may be forced to take a chill pill.

Even as shares in Stada jumped 10.6%, or 3.42 euros ($5.04), to 35.56 euros ($52.38) per share, during afternoon trading in Frankfurt on Friday, after a press report claimed Teva was in talks to potentially bid for the firm, some industry watchers remained skeptical.

"We think this is unlikely to happen, for timing reasons," said Andreas Thiesen, analyst with WestLB Research. He told Forbes.com that Teva was still busy completing its biggest ever deal, the $7.5 billion acquisition of American generics-maker Barr International, and that it was unlikely to embark on another bid for a company worth 1.9 billion euros ($2.8 billion). (See "Teva Ticks Up A Barr")

Stada also seems to be in no hurry to be taken over. Thiesen told Forbes.com that Stada's chief executive had quashed bid speculation earlier this week, stressing that the company was not in talks and wished to remain independent. Although Thiesen said that things could change in two days, he did not believe a bid was a likely outcome right now.

A spokesperson for Teva said that it did not comment on "future activities." A spokesman for Stada refused to comment on the speculation, and also refused to refer directly to the chief executive's comments earlier in the week.

There is no doubt that Stada would still be a good strategic fit with Teva. Stada has a 12.0% share of the German market, which is the biggest generics market in Europe; Teva's lies somewhere in the low single digits. Dresdner Kleinwort analyst Christoph Eckert believed that Teva was looking to expand its European presence, and that an offer for Stada could hit 45 euros ($66.30) per share, or a premium of 26.5% to the current share price.

But HSBC analyst Christian Packebusch said Teva's product portfolio and pricing power would give it opportunities to grow alone in Germany, particularly with a new round of tenders from German health insurer AOK to supply generics drugs worth 2.3 billion euros ($3.4 billion). <<<

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>>> Germany's Stada surges on Teva bid speculation

Fri Aug 15, 2008 5:50am EDT

By Mantik Kusjanto

FRANKFURT, Aug 15 (Reuters) - Shares in Stada (STAGn.DE: Quote, Profile, Research, Stock Buzz) surged as much as 13 percent on Friday on renewed speculation that Germany's third-largest generics drugmaker, worth around 2 billion euros ($3 billion), could be taken over.

Globes, the website of Israel's biggest business daily, cited unidentified sources as saying that Teva Pharmaceutical Industries (TEVA.O: Quote, Profile, Research, Stock Buzz)(TEVA.TA: Quote, Profile, Research, Stock Buzz) was in talks to buy Stada. Teva declined to comment on the rumours.

Stada, which makes copies of AstraZeneca's (AZN.L: Quote, Profile, Research, Stock Buzz) Prilosec anti-ulcerant and Merck & Co's (MRK.N: Quote, Profile, Research, Stock Buzz) Zocor cholesterol drug among other popular off-patent medicines, declined to comment.

Teva, with a market value of around $39 billion, is already buying rival Barr Pharmaceuticals (BRL.N: Quote, Profile, Research, Stock Buzz) for $7.46 billion.

"The acquisition of Stada would make sense for Teva (which is) willing to expand in Europe. Should Teva come up with a price offer, we don't see it below 40 euros per share," said Martin Possienke, an analyst at Equinet.

Stada shares were up 11.8 percent at 35.94 euros at 0900 GMT, compared with a 0.8 percent increase in the German midcap MDAX index. The stock has 100 percent free float.

According to Reuters Estimates, Stada trades at 12.3 times next year's estimated earnings, while Teva is at 15.6 times

Stada shares have lost almost a third of their value this month following a profit warning for this year, due partly to rising competition. The profit margin in its key generics business dropped sharply in the second quarter.

The company, a perennial takeover candidate, said this week it planned to cut costs to improve profitability and also aimed to make acquisitions to expand.

The generics industry is seeing a wave of consolidation as players seek increased economies of scale and geographic reach. Teva, the world's largest generics drugmaker, has been keen to gain a foothold in Germany, the world's second-largest market for generic drugs, where competition is rising.

The Israeli company, little known in Germany, secured a crucial platform to tap the market after German top state health insurer, Allgemeine Ortskrankenkasse (AOK), last year started to secure drug supplies for its clients via tenders.

Analysts said the move will reshape the German generic drugs market, which according to industry tracker IMS is worth about 8 billion euros a year. (Editing by Paul Bolding and Victoria Bryan) <<<