FRANKFURT, Germany — Fresenius SE, Europe's biggest maker of intravenous drugs, will buy APP Pharmaceuticals Inc. for as much as $4.6 billion to enter the U.S. market for generic injectable medicines used in hospitals.
Fresenius, of Bad Homburg, will pay $23 a share in cash for APP, of Schaumburg, Ill.
APP has more than 100 products that are given through injections and intravenous drips in clinics. It is the only U.S. supplier of the blood-thinner heparin in vials after competitors, Baxter International Inc. among them, pulled their versions because of contaminated ingredients.
Still, Fresenius shares fell 52 cents a share, or almost 1 percent, on the New York Stock Exchange because the company may have to sell stock to finance the purchase, analysts said.
Investors are concerned "a capital increase may be necessary," said Tim Albrecht, a fund manager at DWS Investment GmbH in Frankfurt.
Fresenius bought Renal Care Group of Nashville, a rival dialysis clinic chain, for $3.5 billion two years ago.
With this latest deal, Fresenius Chief Executive Officer Ulf Schneider is making a push into the U.S. market for IV cancer and blood-thinning medicines, which is growing at 8 percent a year, faster than branded products.
Fresenius joins Sanofi-Aventis SA and Daiichi-Sankyo Co. in adding copies of medicines as governments and insurers turn to generics to help cut health costs.
The merger "will allow for the rapid globalization of APP's portfolio" and provide "a more comprehensive and complementary offering of injectable pharmaceuticals combined now with devices and delivery systems to customers worldwide," Schneider said in a conference call with analysts.
Fresenius expects the takeover to be earnings-neutral in the first year and add to profit in the second. Fresenius said it's trying to minimize the effect on its credit ratings.
Cost-cutting is big factor"We believe we'll be able to present a very attractive financing plan," Schneider said in an interview Monday. "We want to avoid any unnecessary watering down of the stock as well as any unnecessary deterioration of our credit rating."
Generic-drug makers are becoming attractive to health-care providers as governments and insurers seek to reduce expenses and as patent expirations mean more profitable branded pharmaceutical products are facing cheaper copies.
Daiichi Sankyo offered $4.6 billion for India's Ranbaxy Laboratories Inc. and Sanofi-Aventis SA bid $1.96 billion for control of Zentiva NV last month.
APP makes injectable copies of Pfizer Inc.'s Camptosar to treat colon and rectum cancer; its antibiotic Zithromax; and Novartis AG's Sandostatin drug to treat acromegaly, a bone enlargement. The complexity of the drugs drives APP's margin, said Karl-Heinz Scheunemann, an analyst at Landesbank Baden-Wuerttemberg.
"These drugs aren't easy to make, and they make high demands on sterility and safety because they are injected right into the bloodstream," Scheunemann said.
APP is targeting sales of $730 million to $750 million this year and adjusted earnings before interest, tax, depreciation and amortization of $285 million to $300 million.
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