Bloomberg News

Faes Plans Asia Sales Push, Disposals as Spain Drug Market Falls

October 14, 2011

Oct. 14 (Bloomberg) -- Faes Farma SA, the Spanish maker of allergy treatment bilastine, aims to sell the drug in Asia and dispose of its over-the-counter medicines unit to make up for government austerity measures hurting its domestic market.

Agreements to begin offering bilastine in Southeast Asia will be reached in the next few weeks, General Director Gonzalo Lopez said. About 15 percent of the approximately 100 products in Faes’s lineup aren’t essential, and it’s in talks with potential buyers of the over-the-counter operations because the division’s sales don’t justify the marketing expense, he said.

“In the period through 2012, it would be highly recommended to have some extra revenue to compensate for cutbacks in pharmaceutical spending,” Lopez, 44, said in an interview at the company’s offices in Madrid. “There are conversations right now with some companies possibly interested in several products.”

Spain’s government approved policies in August aimed at saving 2.4 billion euros ($3.3 billion) a year in drug costs as part of its budget cuts. Doctors are banned from prescribing by brand name and must instead list the medicine’s active ingredients, enabling replacements by generic products. Prices were cut 15 percent on drugs that are at least 10 years old for which there’s no generic available.

The measures prompted Faes’s Barcelona-based rival Almirall SA to cut its 2011 earnings forecast on Oct. 4. The stock, which fell 5.1 percent the day of the announcement, has dropped 37 percent in the past 12 months. Faes shares have plunged 51 percent in the period.

Market Share Target

Faes Farma, founded in 1933 and based in the northern Basque-region town of Leioa, has sold bilastine in Spain since April under the Bilaxten brand name. The tablet, used to treat hives and nose congestion, has more than a 10 percent market share, Lopez said. Faes has said it’s seeking to raise that to 30 percent in three to four years.

The drugmaker aims to add France, Italy and Portugal as markets for bilastine in the fourth quarter once it reaches agreements on prices, Lopez said, reiterating an earlier target. It’s eventually seeking a 20 percent market share of Europe’s 1 billion-euro market for allergy remedies, he said.

First-half net income fell 18 percent to 10.4 million euros. Faes, which had forecast “double-digit” full-year profit growth early in 2011, said in July that margins were hurt by discounts imposed by the Spanish and Portuguese governments in 2010 and by spending on product introductions.

Reversing a Decline

The decline in first-half earnings is likely to continue in the final six months of the year, Lopez said in the interview yesterday. Additional licensing agreements for bilastine may enable the company to reverse the drop, he said.

A deal is possible in the next two or three weeks in Indonesia, where “we’ll have the best partner we can have,” Lopez said. Neighboring markets where licensing talks with multinational companies are under way include the Philippines, Thailand and Vietnam. He declined to identify any partners.

An accord with a drugmaker in Japan is possible in the next few months, enabling sales of bilastine in that country as early as 2016, Lopez said. Faes has an “ambitious goal” of accounting for almost 20 percent of the country’s 1.8 billion- euro antiallergy market, he said. Agreements in China, Australia and Canada are expected next year.

Faes Farma’s own international operations account for about 10 percent of revenue, and the company is studying acquisitions in Latin America, especially in Mexico, which may happen in three to five years “or even earlier, if there’s an opportunity,” Lopez said.

The drugmaker forecast in June that 2013 pretax profit will exceed the 19.5 million euros of 2010 by 50 percent and be double the figure in 2014, excluding new licenses for bilastine.

The prediction is “very conservative” because it doesn’t account for potential earning growth from bilastine agreements and royalties, Lopez said.

--Editors: Tom Lavell, David Risser

To contact the reporter on this story: Manuel Baigorri in Madrid at mbaigorri@bloomberg.net

To contact the editors responsible for this story: Angela Cullen at acullen8@bloomberg.net


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