Kapital weekly newspaper
issue 39, 2008

Just one of Actavis’ Bulgarian factories can produce 6.5 billion pills annually – that’s one for every person on Earth, reckons Sigurdur Oli Olafsson, the new chief executive officer of the Icelandic drug maker.

Actavis is the-fifth largest maker of generic pharmaceutical products in the world. The name of its largest shareholder and chairperson, Thor Bjorgolfsson, is very familiar in Bulgaria, where, on top of being the owner of three pharmaceutical factories and a distribution firm, he also owned – until last year – majority stakes in both the former state land-line monopoly Bulgarian Telecommunications Company and Economic and Investment Bank. Currently, the billionaire from Iceland has invested in real estate and continues to exert control over Actavis Bulgaria.

Not for sale
But is Bjorgolfsson preparing to exit Bulgaria definitively and is Actavis for sale? The new Actavis CEO is very firm: “Actavis Bulgaria is an inseparable part of Actavis Group. Bulgaria is the first country we came to when expanding from Iceland. The group was built around Actavis Bulgaria and is not for sale.”

The rumours about a possible sale come from abroad. Last year, Bjorgolfsson’s Novator fund bought back shares in Actavis for more than two billion euro, taking the company private and off the Reykjavik bourse. It is often the step owners make before selling a company.

The rumours reached the factories in Doupnitsa, Troyan and Razgrad, causing alarm as Bulgaria does not boast the best environment for growth – public funds only pay for one third of all medications sold in the country, whereas in Europe the subsidy on average is 82 per cent, nor is there a national policy on pharmaceuticals to give a helping hand to local producers over their foreign peers. Since 2002, the costs of production have risen, but the Government has refused so far to acknowledge this increase and subsidise it accordingly.

“Consolidation is sweeping through the pharmaceutical business, so we understand why the rumours are flying. We are satisfied with our business in Bulgaria, we have invested heavily here and will continue doing so,” Olafsson said.

Actavis Bulgaria topped the local market with 250 million leva turnover in 2007, according to data from analysts IMS Health. In the first half of this year, the company has registered a 15 per cent rise, according to Olafsson. In addition to domestic sales, it exports generics to other countries from the former Socialist bloc.

In 2005, it also acquired the leading pharmaceutical wholesaler in Bulgaria, Higia. Earlier this year, the company lost its leading position on the market and its general manager as well, prompting contradictory rumours that Actavis was either ready to sell the distributor or buy one of its market peers. Olaffson, however, said that there were no active talks in either direction.

Medication for the crisis
“Ironically, in today’s heavy economic climate on the international financial markets, people tend to reach for medicine more often – and that’s good for a generics pharmaceutical firm like Actavis. In general, our results and sales have gone up,” Olafsson said, adding that there was more space for growth.

Over the last five years, we have made 25 acquisitions. This is how we built our company, but eventually we stopped buying companies as the puzzle is near completion. I am not saying that there will be no new buys, but they will occur at a slower pace, because we have the basis for good organic growth.”

Olafsson said he was delighted with Actavis Bulgaria and the performance of the local factories. The Bulgarian subsidiary was top of the group in terms of new products, launching 40 since the start of the year, he said.

The company’s growth is attributed to three factors: the commercial unit that successfully markets the new brands; the opportunity for its factories to implement the production of new brands; and its strong research department, working simultaneously on 380 projects.

“The market for generic drugs will increase, in most countries people with medical insurance pay less for generic medicine. Moreover, the drugs are cheaper and just as good as the patented ones. Currently, 78 per cent of prescriptions issued in the US, 73 and 72 per cent, respectively, for Germany and Great Britain are all for generic drugs,” Olaffson said. In Bulgaria, the ratio is split half-and-half.

“The subsidy system in Bulgaria has its quirks like any other system in the world. I believe that the Government should work closer with people in the pharmaceutical industry so that the system can improve and bring better results for the patients.”