Actavis Says Eastern Europe Boost May Slow On Cash Woes
“Were having difficulty because local currencies in many countries in eastern Europe arent doing so well,” Milan Todorovic, Actaviss executive vice president for central and eastern Europe sales, said in a telephone interview. “Since we are a euro-revenue company, of course we have a big question mark. That is something we dont control.”
Actavis is relying on brands including the Troxevasin gel for hemorrhoids and antacid Almagel to keep customers who pay out-of-pocket for its over-the-counter medicines in the Ukraine and Russia, two of its three biggest eastern European markets, Todorovic said. In Bulgaria, where its the biggest generic drugmaker, Actavis aims to “keep the position” despite the market “not growing very aggressively,” he said. The Balkans, growing at a rate of 20 to 30 percent, are still relatively small, he said.
Reykjavik-based Actavis, which is seeking takeover offers, looked east in 1999 for its first step outside Iceland, buying three plants in Bulgaria from Balkanpharma Holding AD and later acquiring the Bulgarian generic-drug maker. About half of the Icelandic companys more-than 25 acquisitions between 1999 and last year were in eastern Europe, Todorovic said.
Actavis, which doesnt publish financial results, estimates 2008 sales at about 1.7 billion euros on its Web site.
Ruble Falls
The ruble has lost about 19 percent against the euro in the past 12 months, eroding the value of sales in Russia when converted into the companys accounting currency. The hryvnia in Ukraine has lost 22 percent against the euro, while the Bulgarian lev has been pegged to the euro since 1999.
German rival Stada Arzneimittel AG is also fighting currency headwinds after increasing the percentage of sales derived in eastern Europe through acquisitions. It bought Russias Nizpharm JSC in 2005 and Serbias Hemofarm Koncern AD a year later.
Stada cited negative currency effects as a reason for a 27 percent decline in 2008 net income and predicted sales and earnings would fall in the first half of this year in a preliminary report two days ago.
Entrepreneur Bjorgolfur Thor Bjorgolfsson, who took Actavis private in July 2007, spent more than $1.8 billion on takeovers to push the Icelandic company up the rankings in the $75 billion generic-drug industry that is led by Israels Teva Pharmaceutical Industries Ltd. Actavis counts itself as the worlds fifth- biggest, according to sales figures the drugmaker provided for the first half of last year.
OTC Medicines
Actavis capped its eastern Europe purchases in 2007 by buying a production plant in Russia, Todorovic said. Actavis had about 80 million euros in sales in Russia last year, about 2 percent of the generic-drug market there.
“Its very linked to consumer purchasing power, and of course that is changing from week to week,” Todorovic said.
The global financial crisis has forced Hungary, Ukraine, Belarus, Latvia and Serbia to apply for more than $35 billion in emergency loans from the International Monetary Fund, triggering plunges in bonds, currencies and stocks.
The economies of Russia and the Ukraine are expected to contract this year.
Actavis began seeking buyers in January, and is considering selling its U.S. operations separately as bidding enters the second round, according to a person familiar with the matter who declined to be identified because the information isnt public.