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Polish pharmaceutical producer Adamed has bought an 85-percent stake in drug producer Polfa Pabianice from state-owned Polish Pharmaceutical Holding (PHF). The latter company was left with two other drug producers – Polfa Warszawa and Polfa Tarchomin – both of them also scheduled for privatization .

It is one of the biggest privatization contracts in the Polish pharmaceutical sector in recent years, according to PHF. The sale contract was signed last week after six months of privatization procedures.

The value of the contract will be revealed in March, when the transaction is finalized, but industry analysts estimate it to be around zł.300 million. Remaining 15 percent stake in Polfa Pabianice is in the hands of employees and minority shareholders.

Family business expands

Established in 1986 as a family business, Adamed is a research-driven pharmaceutical company with laboratories in Czosnów, a Warsaw suburb and Ksawerów outside of Łódź.

The company specializes in lifestyle-disease drugs. The active ingredients are produced in-house thanks to a chemical synthesis plant in Łódzkie Special Economic Zone.

So far the firm has come up with 20 patents for its drugs. Currently it is developing a quality control laboratory at the SEZ.

Polfa Pabianice is based in Aleksandrów Łódzki, Łódzkie voivodship, which will let Adamed to continue with expansion in the region.

“Taking over of Polfa Pabianice gives us access to new European trading markets. We want to create a national conglomerate producing innovative medicine,” said Adamed's CEO Maciej Adamkiewicz during lat week's contract signing ceremony. Adamed beat Italian investor Recordati as well as two other shortlisted Polish bidders Polpharma and Polfarmex.

Adamed has pledged to invest several million złoty in the Pabianice plant which currently employs about 800. Following the purchase the company's employees will number around 1,500 plus around 200 lab researchers.

After H1 2009 the revenue of Polfa Warszawa was slightly over zł.14 million. Its revenues for 2008 were zł.17.6 – an 8.64 percent growth over 2007.

Two more to go

PHF is continuing with privatization process of two remaining Polfa entities. The sale of Polfa Warszawa is expected to take place by the end of May, while the Treasury Ministry hopes to succeed in selling Polfa Tarchomin by the end of the year.

According to Peter Chudy, a pharmaceutical industry expert at consultancy practice Central European Trust, the privatization of Polfa Warszawa will be one of the most competitive bids due to the firm’s strong product portfolio and attractive real estate in the center of Warsaw. “The new investor is likely to move Polfa’s production outside of Warsaw as there is little room for expansion. From an environmental point of view it makes little sense to maintain a presence in the middle of a city of 1.8 million [inhabitants],” Mr Chudy told WBJ.pl.

After the production is moved outside of the city limits developers can turn their attention to Polfa's land in Warsaw.

There are already three bidders selected for the final process of Polfa Warszawa, with Adamed being again one of them. Other bidders are Polpharma and US-based Perrigo Company. The latter is listed on Nasdaq and Tel-Aviv Stock Exchange.

Attractive Polfa

Polfa Warszawa may repeat the privatization success of Polfa Pabianice. The company has a considerable portfolio of generic products that are recognized in Poland and other CEE markets. It also has a well functioning distribution system extending into Eastern Europe.

“Adamed, having already acquired Polfa Pabianice, may not be as determined to pay top price for Polfa. Polpharma, on the other hand, would strengthen its position as a leader on the local generic market with the addition of Polfa Warszawa’s product portfolio. Perrigo, as the world’s biggest producer of generic pharmaceuticals, sees Poland as an attractive new market from which it can easily expand its presence into the former markets of Soviet Union using Polfa Warszawa’s existing distribution channels,” CET's Peter Chudy said.

After PHF sells both remaining Polfas, it will be liquidated.