Meda's acquisition of fast-growing Swedish OTC firm Antula Healthcare brings on board "proven" marketing expertise to boost existing product sales, a well-established nonprescription drug portfolio and a prolific pipeline for long-term growth.

The 1.8 billion Swedish krona ($282 million) deal announced Feb. 21 is "at the high end of the valuation range of recent OTC deals," analysts with Bank of America-Merrill Lynch said in a same-day note.

However, the acquisition is worth the price partly because "adding Antula's proven sales and marketing expertise to the business could boost" Meda's existing OTC sales, the analysts add.

They maintain that Meda's existing OTC products in the Nordic region "are highly profitable cash cows, but not fast-growing," and Antula's marketing know-how "could boost the growth rate of Meda's existing OTC business" in the long-term.

Antula proved its marketing mettle by building strong brand names and generating 500 million Swedish kronor ($77.7 million) in OTC sales "from nothing five years ago," the analysts maintain.

However, they note, Antula "reinvests much of its profits in sales and marketing and product development so we do not expect the deal to be highly accretive in the short-term." Rather, the deal is better for longer-term growth and "revenue synergies."

"OTC is a continued strategic area for Meda," and "global OTC growth is outperforming prescription, a trend we believe will continue." – CEO Anders Lonner

Antula Deal Expands Existing, Future Portfolio

Meda touts Antula's "strong pipeline of three to four new products that can be launched annually" as another justification for paying 3.6 times Antula's current sales.

Among the brands acquired in the deal are SB12 breath freshener products, Anti cold sore remedies, Nalox nail treatments and others, Meda says.

According to Antula's website, the firm's portfolio also includes Eox pain and inflammation remedies, Fexim iron deficiency products and Zumo migraine treatment.

Meda predicts sales from Antula's brands combined with those from its existing nonprescription products will boost OTC sales to 20% of total sales.

Meda's OTC portfolio at the end of the firm's fiscal 2010 was worth about $312.8 million, Meda's CEO Anders Lonner said in the most recent earnings statement.

Group sales for fiscal 2010, which ended Dec. 31, reached $1.79 billion, making the OTC segment worth about 17% of Meda's total sales prior to the acquisition of Antula.

Meda touts a "strong pipeline of three to four new products that can be launched annually" as justification for paying 3.6 times Antula's current sales.

Last September, Meda estimated its OTC sales in Europe accounted for only about 10% of its sales. Since then, the firm has gone on an OTC shopping spree.

Meda recently acquired Alaven Pharmaceuticals in the U.S. and, in a separate deal, three supplement brands from GlaxoSmithKline (Also see "Meda Lands In U.S. OTC Space With Alaven Buy" - Pink Sheet, 6 September, 2010. and Also see "Meda Tacks On U.S. Supplements As GSK Cleans Out Medicine Cabinet" - Pink Sheet, 20 December, 2010.).

The firm fully integrated Alaven during its fiscal 2010 fourth quarter. It expects synergies from Alaven to exceed $50 million, Lonner said during a Feb. 14 earnings call with analysts.

"OTC is a continued strategic area for Meda," he added, and "global OTC growth is outperforming prescription, a trend we believe will continue."

Meda Could Expand Antula Products' Reach

Antula's products will add even more revenue once Meda expands them to other regions where it has OTC operations, such as the U.S. and Western Europe, the firm suggests.

Currently, Antula's sales are "just in the Nordics," but several of the brands could "become internationally strong brands," Meda said.

Even though the OTC market in the Nordic region is less developed than Western Europe, it still "offers scope for growth," Bank of America analysts say.

They note OTC products' share of the total pharmaceutical market in the Nordic region is only 8% to 14% compared to 30% in Western Europe and the U.S.

Demand for Antula's brands and Meda's existing OTCs also could increase in the firms' homeland of Sweden, where recent pharmacy deregulation allowed the introduction of privately owned pharmacies "keen to increase profits," the analysts note.

Meda and Antula expect the deal to close in the first half of the year, subject to standard closing requirements and the approval of the competition authorities.

Meda says it will finance the deal with existing credit facilities.

By Elizabeth Crawford

Antula Acquisition Expands Meda's OTC Portfolio, Marketing Expertise

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