Gruenenthal CEO Has $1.3 Billion for Latin America Purchases

Gruenenthal GmbH is ready to spend 1 billion euros ($1.3 billion) on acquisitions “in the near future” to expand its pain medicines business in Latin America, Chief Executive Officer Harald Stock said.

The family-owned company, based in Aachen, Germany, is looking for deals in Brazil and wants to grow further in countries such as Mexico, Stock said in an interview yesterday in San Francisco, where he was attending JPMorgan Chase & Co.’s health-care conference. Gruenenthal, founded by Hermann Wirtz after World War II, makes the Palexia painkiller and Norspan patches.

“We don’t feel rushed, and we shouldn’t do silly things with our cash, but if the opportunity is right and the numbers make sense, we are willing to invest big,” he said.

Drugmakers are turning to Latin America for investments to reduce their reliance on slower-growth markets such as Europe. The 2009 purchase of family-owned Medley gave Paris-based Sanofi access to Brazil’s third-largest pharmaceutical company and its biggest maker of generic medicines.

Sanofi “did a terrific job there,” Stock said. “They started the wave, then multiples went up.”

Gruenenthal, which has had a presence in Latin America since 1968, will still be able “to buy at a decent multiple and not do crazy stuff” in Brazil, he said.

Stock has been reorganizing the company since taking over as CEO in 2009. He sold assets such as the Belara contraceptive tablet and the Colistin antibiotic against bacterial infections in cystic fibrosis, narrowing the focus to pain treatments. Gruenenthal agreed in July to sell assets in central, eastern Europe and the Middle East to Stada Arzneimittel AG.

Cash Holding

Stada has since partially withdrawn from the transaction. The Bad Vilbel, Germany-based company said in a Jan. 1 statement it was retreating from the purchase of assets in Poland, Slovenia and other central European countries.

“They didn’t walk away from the entire deal, but we were very surprised,” Stock said about Stada’s decision.

Gruenenthal will consider “all options” on the remaining portfolio, he said.

While the company is already in talks with “five potential acquirers,” a sale is no longer certain, Stock said. He didn’t identify the potential buyers.

“With all the divestitures we completed, we don’t necessarily need further liquidity,” Stock said. The company has $500 million in cash and is free of debt, he said.

Gruenenthal is today owned by 19 shareholders, all of them belonging to the Wirtz family. The company’s sales exceeded $1 billion last year, Stock said.

Painkillers Focus

Painkillers will remain Gruenenthal’s main focus in the coming 10 years, although the company plans to ultimately expand in adjacent businesses such as inflammation, he said. It is developing a new analgesic, known as GRT6005, in partnership with Forest Laboratories Inc.

Gruenenthal, whose products are sold in the U.S. through a partnership with Johnson & Johnson, doesn’t plan to sell shares in an initial public offering, Stock said.

“Our shareholders are very committed,” Stock said. “Being a private company right now seems to be a huge competitive advantage over peers” as it allows Gruenenthal to “over-invest” in research and development, he said.

There are “no plans whatsoever” to sell the company, Stock said.

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