Peter Goldschmidt, CEO of the German group Stada, has been the architect of the company's transformation in the last five years, which has led it to double sales and multiply operating profit by going beyond its traditional business of generic production , in which it is one of the main European groups.
Stada was a generic manufacturer a few years ago, but today most of the business comes from the self-care division. What is the reason for this change of focus?
When the company was acquired by private equity funds Bain Capital and Cinven in 2017, we decided we wanted to be a broad provider of medicines, so we had to go beyond generics and incorporate self-care. And we also decided to supply biosimilars. And go for products that were not covered by the big innovative companies, with fewer potential patients. Our purpose is to take care of people's health as their trusted partner and we have expanded our focus beyond generics, which now account for only 38% of our sales, compared to 43% for self-care.
Many companies stop making generics. will you continue?
We are doing well. We are not in difficult markets like China, India or Japan, but in Europe, with a large distribution network, and we are building a large plant in Vietnam and a large packaging center in Romania. We have 20 plants around the world. We have been a medium-sized generic company. We are now a large global company with generics and self-care products. Six years ago we did not bill even 2,000 million and now we are around 4,000. In the long term we have large economies of scale, which is why we want to grow in generics.
That market in Spain grows little.
Yes: generics are 40% of drugs sold in units but 20% in value. And this is the real problem. The market share of generics should be much higher (in Germany or the United States it is almost 90%), and the use of self-care products for health should be greater. And innovative products should be available sooner for Spanish consumers. The potential of generics in Spain has not been reached, and the country is falling behind. The Government should take measures and propose incentives to make this market grow.
How did the rising costs and logistical problems of the pandemic affect you?
Our diversification is a competitive advantage in the current environment, in which the increase in the prices of medicines does not cover the increase in production costs.
We are well positioned: we quickly buy a large quantity of active ingredients, so we are covered for a long time. Our energy cost has not risen much because we are in countries like Serbia or Vietnam, which have had it under control. And we have put a lot of focus on our supplier network: we have 500 that manufacture for us, some from low-cost countries. We have a resilient supply chain, but it is not easy or perfect: we have 25,000 references.
Is your growth in self-care health due only to the purchase of product portfolios?
We have organic and inorganic growth and the strategy is to continue buying. In Spain we have only done one operation, but we look at everything. We have a good portfolio of self-care health products, but we want to have more. And products that we have in countries like Great Britain or Germany, we are also going to launch them here.
Self-care for health is based on local brands. For a company that wants to have a European footprint, isn't that a disadvantage?
We do not believe in global brands, but in local ones. What we do is promote them, extend them, turn them into “umbrella brands”. Like Lactoflora or Trofolastin or Ladival. We make them grow by expanding the range, with new presentations, applications or indications...
Especially in markets such as Spain, where self-care for health is not so strong, it is very important to have brands that are deeply rooted and that generate trust. Here we are not as strong in self-care -we are in position twenty- as in generics. And we want to grow strongly.
Why don't they grow so much in Spain in these products?
The size of the Spanish self-care market is much lower than that of other countries. There is less prevention, less self-responsibility, and everyone goes to the doctor for a cold or a little fever instead of going to the pharmacy to get something recommended. In other countries the doctor sends you to the pharmacy and many dermatology products are not even reimbursed.
What does your third division, specialized health, do?
It includes drugs for rare diseases, and biosimilars: we have five on the market and ten in our portfolio.
Stada left the stock market in 2018. How has that affected your strategy?
Leaving the stock market was very good for us: it allows us to think in the long term, in products that we will launch in 2030. Now we are more focused on developing our vision, our business model. And we can reinvest everything we generate because we don't pay dividends. Thus we have invested 1,600 million euros in buying products and companies to create a portfolio with a lot of growth potential.
Now in the financial media it is said that its shareholders are considering selling their stake or taking the company back on the stock market.
The funds are studying different options, but there is no concrete plan. Returning to the stock market is an option. But there are final investors interested in buying the company. Now, with close to $1 billion in operating profit and strong multiples that the self-care business is valued at, we are a very large company for private equity funds. With either option, however, I think the company will go it alone -- Big Pharma doesn't like generics or self-care products -- and stick with the strategy, because it works.
