EMS proposes merger with Hypera to form Brazil's largest drugmaker

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EMS proposes merger with Hypera to form Brazil's largest drugmaker

Home/Pharma News | Posted 13/11/2024 0 Post your comment

On 21 October 2024, Brazilian pharmaceutical giant EMS proposed a partnership with competitor Hypera Pharma, setting a course to become Brazil’s largest drug manufacturer.

EMS, established in the mid-1950s and a leader in Brazil’s domestic pharmaceutical sector, pioneered generic medicines production since 1999. This proposal follows multiple discussions about a potential merger, although no agreement was reached regarding the share exchange ratio.

Hypera announced that its board would evaluate the proposal, potentially bringing in external advisors to assist with the review. According to EMS, the merger could be finalized within 30 days, and they do not expect Brazilian antitrust regulators to impose restrictions.

EMS views the proposed merger as way to accelerate its strategy goals while minimizing short-term salesimpact. Hypera specializes in over-the-counter medications, while EMS focuses primarily on generic drugs. Domestic companies in Brazil often face limited international competition [1], resulting in a greater availability of affordable originator products but relatively high prices for generics.

The combined entity would generate R$16 billion in revenue and capture an estimated 17% market share—an advantage, considering most pharmaceutical companies in Brazil maintain a market share below 10%.

Through the merger, the company would gain bargaining power with retailers, distributors, and pharmacies. It would optimize the efficiency of sales representatives visiting doctors, improve manufacturing processes, and benefit from complementary research and development efforts. Joint purchasing of raw materials and packaging, along with logistics synergies, would further drive growth.

Privately owned EMS proposed a public tender offer for up to 20% of Hypera shares at 30 reais per share, along with a stock swap. The represents a nearly 17% premium over Hypera’s stock closing price on 18 October 2024. While details on the stock swap were not provided, the deal would allow EMS to control aminimum 60% of the merged company.

EMS highlighted that both companies operate in comparable markets, each generating approximately US$1.4 billion in net revenue over the 12 months leading up to June 2024. However, their core business focuses remain distinct.

Both Hypera and EMS leadership agree the merger would strengthen their market-leading position, securinga 17% market share—more than double that of the next competitor, Eurofarma, in segments such asprescription drugs, generics, and hospital treatments. Together, they possess a strong portfolio of popular brands like Buscopan, Benegrip, Neosaldina, and Engov.

However, some industry insiders question the practicality of the merger and whether the companies can move forward with their ambitious plans.

The pharmaceutical market in Brazil

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Reference
1. GaBI Online - Generics and Biosimilars Initiative. Pharmaceutical manufacturing companies in Brazil [www.gabionline.net]. Mol, Belgium: Pro Pharma Communications International; [cited 2024 Nov 13]. Available from: www.gabionline.net/generics/general/pharmaceutical-manufacturing-companies-in-brazil

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