Bloomberg News

Celesio to Distribute Merck KGaA’s Fertility Products in U.K.

December 01, 2011

Dec. 1 (Bloomberg) -- Celesio AG, Europe’s biggest drug wholesaler, will be the exclusive distributor of fertility products in the U.K. for German drugmaker Merck KGaA beginning in January, Chief Executive Officer Markus Pinger said.

Profit will rebound in 2012 due to restructuring and the company’s German business will improve once a new fee system takes effect in January, Pinger told reporters during a dinner yesterday. Merck sells 63 percent of fertility drugs in the U.K., according to Celesio.

Celesio reduced its 2011 profit forecast on Oct. 26 for the second time this year, citing increased regulation in the U.K. and competition in France and Germany. Pinger, who became CEO in August, is overhauling the Stuttgart, Germany-based company and may sell units that handle logistics and sales and marketing for drugmakers. He is also reviewing the DocMorris mail-order brand.

Profit next year will be “significantly better” as 2011 results include a “dramatic” effect from one-time expenses of as much as 100 million euros ($134 million), Pinger said.

New Rules

Celesio’s German business should improve when new rules give wholesalers a fixed payment for each package they deliver to pharmacists, he said. Wholesalers will receive 70 cents per package and 3.15 percent of the cost of the medication, compared with an average of 6 percent per package previously. Wholesalers were hurt over the last year when drugmakers were forced to offer mandatory rebates in Germany. The fee-per-package wholesalers receive goes toward buying and storing product from drugmakers and distributing it to pharmacies.

Celesio’s German wholesale unit GEHE and Novartis AG are in talks about an ongoing delivery dispute, Pinger said. Novartis stopped deliveries of certain medicines to Celesio in mid- October, as well as to Germany’s biggest wholesaler Phoenix Pharmahandel GmbH in November, over a disagreement on prices and delivery conditions.

Novartis has been “optimizing” its contracts with wholesalers and adjusting “many-years-old discount rules” that were outdated and no longer in line with the market, Eric Althoff, a spokesman for the Basel-based drugmaker, said in an e-mailed statement to Bloomberg on Nov. 9.

Celesio doesn’t expect to make any acquisitions before 2013 as it restructures “unless a really good deal presents itself,” Pinger said.

GEHE’s pilot program with pharmacists, which offers software to manage ordering and inventories as well as marketing and consulting services, has been successful, he said.

“The program has great potential for us and the pharmacies,” he said.

--Editors: Thomas Mulier, Kristen Hallam

To contact the reporter on this story: Allison Connolly in Frankfurt at aconnolly4@bloomberg.net

To contact the editor responsible for this story: Phil Serafino at pserafino@bloomberg.net


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