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 As part of a doubling in merger activity, buoyed by a combination of
private equity and big pharma, Novavax bought the Praha Vaccines
factory near Prague in a $167 million transaction last May. It
followed up by partnering with Polish biotech company Mabion in
March.
Novavax decided the Praha Vaccines factory in Bohumil, Czech
Republic, was the best solution to expanding vaccine production in
Europe, spokeswoman Laura Keenan said, adding: "Talent in the region
was a key consideration."
The pharmaceutical industry focused around Czech Republic, Hungary
and Poland is dwarfed by that of nearby Germany, but industry
insiders and analysts see scope for growth based on moderate costs
and an expectation of higher healthcare spending, as well as a
scientifically educated workforce.
For private equity, there is the lure of high returns, while big
pharma can reduce costs by buying growing firms that have carried
out large amounts of research and the location in the European Union
means widely recognised standards are met.
The total value of inbound deals with disclosed value in the
healthcare and pharmaceuticals industry in central and eastern
Europe doubled to 1.9 billion euros ($2.31 billion) in 2020 from 932
million euros a year earlier, a report from consultancy Mergermarket
and Mazars found.
"Even without COVID-19, the region's demographic and economic trends
point towards activity in the sector," the report said.
"As the population ages and incomes rise, investors will continue to
see a clear upside in consolidating the industry to cut cost and
gain scale."
MEDIEVAL PHARMACY MEETS THE MODERN AGE
A focal point of the activity has been Zentiva, a Czech company that
traces its roots back to a medieval Prague pharmacy and last year
acquired Alvogen's central European business for undisclosed terms
from private equity firm CVC Capital Partners.
"For sure, consolidation in our region is inevitable," said
Krzysztof Krawczyk, a partner at CVC.
For the drug companies, small innovators are of particular appeal.
"It is easier for companies with strong shares in mainstream market
segments to buy an innovative biotechnology company and thus skip
the research and development phase and quickly expand their product
range," Krawczyk said.
Adam Pietruszkiewicz, a board member at Mabion, and also a partner
at private investment company Twiti Investments, took a similar
view.
"Most likely, the more of these companies and start-ups that appear,
the more transactions there will be," Pietruszkiewicz said.
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 POLISH BIOTECH
Upstart biotech companies in Poland – eastern
Europe's biggest economy – are attractive
targets, investors and companies say, and also
ambitious to grow themselves.
Selvita based in Krakow, southern Poland,
completed its first international acquisition in
January with a $38 million deal for Croatian
Fidelta - owned by Belgium's Galapagos in
January. Although Selvita has
drawn investor interest, it plans to remain a buyer rather than
seller, executive vice president Milosz Gruca said.
He too predicted a combination of bigger drug companies and private
funds would step up the pace of acquisitions of emerging companies.
"We have many new, young and successful innovative companies, which
are shaping the new perspective for the CEE region and the way it is
seen by investors," Gruca told Reuters.
"Big pharma companies are interested in the programmes these smaller
firms are bringing to the market. These companies will also be
subject to potential acquisitions or partnering deals."
POTENTIAL TO GROW
So far, Sanofi's 1.9 billion euro sale of Zentiva to U.S. private
equity group Advent in 2018 is one of the biggest deals in the
region.
Since then Zentiva has made two more acquisitions in emerging Europe
and is scouring the region for others as it builds up its branded
generics business, the director for the company's CEE business Hacho
Hatchikian told Reuters.
He said Zentiva was targeting late-stage assets and openly exploring
all options in biosimilars, or cheaper versions of biologic drugs
made from living organisims.
The value of drugs sold in the 38.5 billion-euro German market is
still more than three times that in the Czech, Hungarian and Polish
markets combined, figures from the European Federation of
Pharmaceutical Industries and Associations show.
But the gap is expected to narrow as healthcare standards in eastern
Europe converge with those of the West.
"The CEE markets provide a significant growth prospect as they
follow a clear convergence trajectory to the Western European (and
U.S.) standards both in treatment options and healthcare spending,"
Zentiva's Hatchikian said.
($1 = 0.8228 euros)
(Reporting by Agnieszka Barteczko and Anna Koper in Warsaw and
Michael Kahn in Prague; writing by Michael Kahn; editing by Barbara
Lewis)
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