Fagron announces today that it has signed a definitive agreement for the acquisition of Brazilian DEG, a leading supplier of raw materials for pharmaceutical compounding to pharmacies in Brazil. The São Paulo-based DEG is number 2 on the Brazilian market, with expected turnover of approximately € 25 million in 2010. The EBITDA margin of DEG is approximately 16%. DEG will be consolidated from 1 November and will immediately contribute to Fagron’s earnings per share.
Ger van Jeveren, founder and CEO of Fagron: “The acquisition of DEG is an important milestone in Fagron's history. Until the beginning of 2010, Fagron was only active in Europe. With the acquisition in mid-May of the already fully integrated American Gallipot and the acquisition of Brazilian DEG, within one year Fagron has become the worldwide market leader. Potential acquisitions in Europe, the United States, Canada and Latin America are currently being looked into to further strengthen this position.
Because of the excellent track record and quality of the organisation of both DEG and Fagron, we expect a rapid and smooth integration, with a particular focus on the substantial synergy advantages and economies of scale. A project to introduce Fagron's broader product range on the Brazilian market will be started up immediately.
We are very pleased with the confidence that the former owners of DEG, Vanderlei Esteves, Walter Giarreta and Geraldo Dornelas, and the senior management have expressed with regard to Fagron's strategy and their commitment to further contribute to the development of DEG.
As of 1 January 2011, Rafael Padilla, the successful General Manager of Fagron Ibérica, will be appointed General Manager of Fagron's Brazilian activities. As of the same date, Juan Manuel Martin, the current Business Development Manager of Fagron Ibérica, will succeed Rafael as General Manager.”
The former owners of DEG: “We are convinced that DEG is a perfect match for Fagron; they are leaders in everything to do with pharmaceutical compounding and have built up an impressive track record over the past 20 years. Since its founding, DEG has built up an excellent reputation and is a leading company in Brazil, particularly when it comes to quality. The acquisition offers promising opportunities for the future for both DEG and Fagron.”
DEG (www.deg.com.br) was founded in 1974 by the current sellers, the Messrs Esteves, Giarreta and Dornelas. DEG's GMP production facilities, approved by ANVISA (Agência Nacional de Vigilância Sanitária), and its central warehouse are located in São Paulo. With expected turnover in 2010 of approximately € 25 million, DEG is the undisputed number 2 on the Brazilian market. Approximately 95% of the turnover comes from the sale of pharmaceutical raw materials to compounding pharmacies. Industrial sales contribute approximately 5% of the turnover.
About the Brazilian market
Despite the global economic crisis, the market for pharmaceutical compounding in Brazil has grown significantly over the past years; a development that is expected to continue in the coming years. Patients in Brazil have a great deal of choice, which means they tend to opt for tailor-made pharmaceutical compounds which virtually always have less side effects and are therefore a valuable alternative. Partly because of this, Brazil is by far the largest market in the world for pharmaceutical compounding.
In addition to 25,000 regular pharmacies, Brazil also has approximately 7,000 compounding pharmacies. These Farmácia de Manipulação are specialised in preparing tailor-made medications for patients. The compounding pharmacies offer a unique concept in which the direct contact between the pharmacist and the prescriber regarding the possibilities of and developments in tailor-made pharmaceutical medication plays an important role. The compounding pharmacies in Brazil have a very high level of knowledge and quality.
Fagron wants to further strengthen its position as market leader in the rapidly growing market for pharmaceutical compounding by means of robust organic growth and a focused buy-and-build strategy.
The emphasis in Europe is on acquisitions in the existing markets and in Scandinavia and Central and Eastern Europe. Acquisition possibilities in the United States and Canada are also being looked into. The acquisition of DEG offers interesting possibilities for further expansion in the Latin American region.