Stada to Seek Deals as Sector Consolidates

German generic drugmaker Stada said rivals' growing appetite for takeovers is spurring it to also seek acquisitions as the industry goes for size to cut costs and compete on price.

Consolidation in the pharmaceutical and generics industry was set to continue, Chief Executive Hartmut Retzlaff told shareholders at the group's annual general meeting on Wednesday.

"In the face of this we, too, want to and have to complement organic growth through acquisitions."

Swiss drugmaker Novartis this month agreed to buy generic dermatology products maker Fougera for $1.53 billion, a week after Watson snatched up rival generic drugmaker Actavis Group for $5.6 billion.

The Watson-Actavis deal which will create a group with $7.1 billion in sales, almost three times Stada's $2.4 billion. Israel's Teva remains the undisputed No.1 in generics, having chalked up billions in takeover deals over the last 10 years.

Retzlaff earlier this year, however, said the need for size was overstated, rejecting a view held by a number of analysts that Stada was lacking economies of scale.

A recent Reuters report showed that Stada failed to strike two takeover deals following months of exclusive talks in a key emerging market, Russia.

Burdened with net debt worth three times its annual core earnings, Stada's financial firepower is seen as limited. Thomson Reuters StarMine data shows that the debt multiple for Teva and Watson stands at 1.5 and 0.8, respectively.

Retzlaff also said on Wednesday that Stada's initial goal to cut 800 jobs by 2013 would be reached this year.