'We may buy another company in Germany'

The Rs 1,239 crore (Rs 12.39 billion) pharmaceutical major Wockhardt Limited, which has indicated that it is looking to snap up pharma companies in Europe, could end up making another acquisition in Germany.

Speaking exclusively to rediff.com, Habil Khorakiwala, Chairman, Wockhardt Ltd, said that the company was looking at active inorganic growth in the European market.

"No one should be surprised by the fact if we acquire another company in Germany. Germany is a crucial branded generic market and is estimated to represent an opportunity worth 7 billion euros."

The Wockhardt move is not surprising since the German market represents almost 60 per cent of the European drug market in value terms estimated to be around 12 billion euros.

At the same time Khorakiwala pointed out that the acquisition could be in some other part of Europe too. "We are concerned with access to the German market and if for that an acquisition has to be made outside the German market, then so be it," he said.

It was only in May last year that the company had acquired esparma GmbH, a $20 million small player in the German market, for a consideration of $11 million.

"The German acquisition just happened, as no acquisition happens by design beyond a point. There was tremendous value proposition in the acquisition and it gave us market access into the German market."

"Now we think that we know enough of the market to look at expanding our presence in the German market," Khorakiwala said.

The company had through its acquisition of esparma GmbH also taken on about 70 employees, most of them in sales, marketing and regulatory functions. Wockhardt also acquired esparma's 135 marketing authorisations, of which a significant 67 are in Germany.

Interestingly, the German market is showing tendencies of moving from a branded generic market to that of a pure generic market. The United States and the United Kingdom are pure play generic markets and branded generics are not a big hit in these markets.

"The implication of such a trend over a period of time would mean that while gross margins would come down, associated marketing costs will also come down," he said. Gross margins in the German market can be as high as 70 per cent, while in the US market margins hover around 50 per cent.

Wockhardt is sitting on about $100 million from a recent FCCB issue and this could be utilised for making the acquisition in 2005. At the same time the company has restructured its international business and also got a new president for research and development, which specially will focus on pharma R&D dealing with its generic business in US.

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