(Adds comment by company)
By Katharina Bart and Oliver Hirt
ZURICH Aug 12 Shares in Swiss pharmacies
operator and drugs firm Galenica jumped on Tuesday
after the company said it planned to list its two main arms
separately as soon as 2017, fuelling speculation that the drug
unit could be picked up in a takeover.
Large drugmakers have undertaken more than $100 billion
worth of acquisitions in the first six months this year,
according to ratings agency Moody's, as companies look to build
scale in leading businesses or acquire a foreign tax domicile to
cut their tax bills, a tactic known as inversion.
Galenica's chairman, Etienne Jornod, has long resisted calls
from analysts and investors to split up the company, in which he
is also a major shareholder. As recently as when it held an
investor day in June Galenica has denied that the company would
change its current structure.
However, Jornod told investors on Tuesday that plans to
split had been launched "a few months ago," with the final
decision being made after a European advisory body gave its
backing last month for Velphoro, an iron treatment used for
patients receiving kidney dialysis.
The company said earlier on Tuesday it was now realigning
management to lay the groundwork for the separation, naming
Shire executive Soren Tulstrup as head of the drugs
business, Vifor Pharma, and appointing Galenica's chief
financial officer, Joerg Kneubuehler, as the new head of
Galenica Sante, the healthcare business which runs several
chains of pharmacies in Switzerland.
Tulstrup and Kneubuehler, who will both report to Jornod,
replace Galenica's group chief executive David Ebsworth, who
will advise on special projects until he retires at the end of
August next year.
"It's surprising, but it's also positive," said Zuercher
Kantonalbank analyst Sibylle Bischofberger, who has an
investment rating on the shares of 'underweight' as she expects
Galenica's business development to remain weak.
Alongside the planned split, Galenica reported on Tuesday a
9 percent drop in its first-half net profit to 134.7 million
Swiss francs ($148.3 million), on virtually unchanged sales of
1.66 billion francs. Operating profit at the drug business was
up 3.9 percent at 139.7 million francs on sales up 6 percent at
337 million francs out of total operating profits down 7.2
percent at 189 million francs.
"In our opinion, even though a separate listing of its
businesses is not being envisaged shortly, Galenica's new
structure exposes its pharmaceutical unit as a takeout target,"
Helvea analyst Olav Zilian said in a note to investors, rating
the stock a 'buy'.
However, Galenica said it would shield Vifor Pharma, from
acquisition attempts until it is equipped to stand alone.
"As long as Vifor Pharma is not strong enough to develop by
itself, the company will remain within the group," Jornod said
in an interview published on the firm's website.
"However, we think that soon, within three to five years,
the moment will come to allow it to stand on its own feet."
Instead, Tulstrup's job as head of Vifor Pharma will be to
seek acquisitions, such as in heart and gastroenterology drugs,
to bolster a business facing a patent cliff on its iron
products, with little in the pipeline to compensate, Galenica
Investors cheered the plan, with dealers citing the
long-standing calls from analysts and shareholders for a split
as well as takeover speculation for Vifor.
The shares ended 5.3 percent higher at 860 francs, when the
Stoxx Europe 600 healthcare sector index was down 0.2
Major Galenica shareholders include firms linked to Swiss
investor Martin Ebner, which have a 15.76 percent stake in
shares and call options, as well as Alliance Boots Investments 2
GmbH, an investor group related to Europe's biggest pharmacy
chain operator Alliance Boots, which owns a 25.48
The Galenica stake held by Alliance Boots was transferred to
a separate vehicle owned by the same shareholders and isn't
affected by last week's news that U.S. retailer Walgreen Co
is going ahead with the full takeover of Alliance Boots
next year, a spokeswoman for the Swiss firm said.
Galenica's chairman, Jornod, received 40,000 shares in
Galenica in 2012, blocked for sale until 2017. His current stake
totals nearly 44,000 shares, worth more than 37 million francs
at current market prices.
(1 US dollar = 0.9082 Swiss francs)
(Additional reporting by Rupert Pretterklieber.; Editing by
Sophie Walker and Greg Mahlich)