Kalbe Farma Creates M&A Team to Target Health-Care Acquisitions in Asia

PT Kalbe Farma, Southeast Asia’s largest drugmaker, created a three-person team to help it find acquisitions in the region, including producers of consumer health-care products, Chief Financial Officer Vidjongtius said.

The strategic investment team was formed last quarter to identify targets costing $10 million to $50 million, Vidjongtius said in a telephone interview from Jakarta yesterday. Kalbe, which makes prescription drugs and nutrition supplements, hired a former Unilever executive to oversee the task, he said.

Kalbe has about $150 million in cash and could use treasury stock to boost funding if necessary, Vidjongtius said. It wants to buy businesses that sell over-the-counter products and herbal remedies. That would broaden Kalbe’s product range, mitigating the threat of competition, said Andy Ferdinand, who tracks the drugmaker for PT Batavia Prosperindo Sekuritas in Jakarta.

“They are playing on volume,” Ferdinand said in a telephone interview. “It’s difficult for pharma companies to increase prices in Indonesia because of industry competition.”

Kalbe decreased 0.8 percent to 3,250 rupiah at the 5 p.m. close of trading on the Indonesian Stock Exchange in Jakarta. The shares are unchanged from their Jan. 1 level, while the benchmark Jakarta Composite Index (JCI) has declined 4.2 percent this year.

Southeast Asian companies have made at least $211 million of acquisitions in pharmaceuticals over the past five years, with the biggest being Kalbe’s $48 million purchase of Indonesian drug distributor PT Enseval Putera Megatrading, according to data compiled by Bloomberg.

$4 Billion Market

Kalbe gets 95 percent of its revenue from Indonesia, where it has 13 percent of the market for prescription and over-the- counter medicines, Vidjontius said. It’s one of about 200 companies -- including 30 multinationals -- competing for $4 billion of sales, he said.

A universal insurance program slated to go national in 2014 may bolster pharmaceutical sales in Indonesia and increase health-care spending to 5 percent of the nation’s gross domestic product from about 2.5 percent now, Vidjontius said.

Still, Kalbe is seeking a broader geographic base and is selling in eight other Asian markets as well as Nigeria and South Africa.

The objective is to “create a bigger Kalbe,” Vidjongtius said, adding that the Philippines and Singapore have been identified as growth areas.

To contact the reporter on this story: Natasha Khan at nkhan51@bloomberg.net

To contact the editor responsible for this story: Jason Gale at j.gale@bloomberg.net

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