Stada Falls on Concern Crimea Conflict May Hurt Sales

Stada Arzneimittel AG, Germany’s biggest maker of generic drugs, fell the most in more than three months on investor concern that the mounting conflict between Russia and Ukraine will crimp revenue.

Russia accounted for 19 percent of Stada’s sales in 2012, while Ukraine contributed another 1.7 percent. The Bad Vilbel, Germany-based company highlighted Russian growth when it reported 2012 earnings last year. Stada declined 5 percent to 35.40 euros in Frankfurt, the biggest decline since Nov. 13.

“It’s difficult to assess the potential repercussions, and the company certainly has a high exposure to Russia,” Ulrich Huwald, an analyst at Warburg Research GmbH, said by phone.

U.S. Secretary of State John Kerry is traveling to Ukraine today as western leaders seek to respond to Russia seizing control of the eastern European country’s Black Sea region of Crimea. Ukraine mobilized its army yesterday and called for foreign observers as gunmen surrounded military installations in Crimea a day after Russian President Vladimir Putin got lawmakers to approve troop deployments.

Investors should avoid Stada if the conflict becomes more intense, Commerzbank AG analysts said in a report today. Sales in Russia rose 23 percent to 343 million euros ($472 million) in 2012, the company said last year.

‘No Pressure’

The company released preliminary figures today, reiterating a forecast that sales this year will rise to 2.15 billion euros from 2.01 billion euros in 2013. The company sees 2014 adjusted earnings before interest, taxes, depreciation and amortization of 430 million euros, while adjusted net income may reach 215 million euros. Stada is set to report full 2013 earnings on March 27.

“We see no pressure on our business to date from the tensions in Ukraine,” spokesman Christian Goertz said by e-mail.

The decline in Stada’s shares came amid a global sell-off in stocks. Russian stocks had their biggest decline in five years and Ukraine’s Eurobonds slumped the most on record. Standard & Poor’s 500 Index dropped 1 percent.

Booming Investments

Investments in Russia by drug companies boomed in 2011 after the government pushed for a greater share of the country’s medicines to be produced locally. Russia’s pharmaceutical market totaled about $20 billion in 2013, according to Ksenia Arutyunova, a Moscow-based analyst at Rye, Man & Gor Securities.

“The tension between Russia and the West has increased dramatically and it could pose risks for continued investment in the long term,” she said, adding that 80 percent of Russian drugs are imported. “I don’t see the turmoil as a short-term risk as most partnerships with local companies are long-term contractual obligations, but would be wary that a worsening of relations may impact future investments.”

Novartis AG began construction of a manufacturing plant in St. Petersburg in 2011 as part of a five-year, $500 million investment in the country. AstraZeneca Plc the same year began building a $150 million manufacturing facility in the Kaluga region, and has formed several partnerships with Russian development institutes. Teva Pharmaceutical Industries Ltd. said in 2011 it would invest at least $50 million in a production facility in Yaroslavl, about 160 miles northeast of Moscow.

“Activities in Russia, including the construction of Teva’s first plant in the nation, have not been affected by recent events,” a spokesman said by e-mail.

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