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RNS - STADA: Health care reform destroys 230 jobs in German sales

Company: STADA Arzneimittel AG Date: 2007-09-28 Language: English Register to download
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 News Details

Corporate | 28 September 2007 13:20

#   

STADA: Health care reform destroys 230 jobs in German sales

**STADA Arzneimittel AG / Restructure of Company**

Release of a Corporate News, transmitted by DGAP - a company of EquityStory
AG.
The issuer / publisher is solely responsible for the content of this announcement.
----------------------------------------------------------------------

Today, on September 28, 2007, the Executive Board of STADA Arzneimittel AG
provided information, through an ad hoc release pursuant to the German
Securities Trading Act, about a comprehensive restructuring of parts of the
German generics sales.

In the course of this restructuring, 230 jobs will be eliminated in German
generics sales in the STADA Group. Speaking in front of the Worker’s
Council and affected employees, STADA’s Chairman of the Executive Board,
Hartmut Retzlaff, alluded to 'the most painful decision in my professional
career to date'.

Retzlaff added: 'This reduction is a direct consequence of the health care
reform which took effect on April 1, 2007. We have always warned the
politicians: This reform will destroy jobs in the generics sales sector
because if the health policy wants the demand for generics to be primarily
controlled by means of discounts to health insurance organizations and by
means of a product selection in the pharmacies and no longer to lie mainly
in the doctor’s hands, then the sales structures must be adapted and this
will cost jobs. And unfortunately, this is exactly what we must carry out
now with the restructuring which has been initiated today.'

Within the scope of the restructuring, 230 jobs in doctors-related sales
forces and related sales functions in STADA’s two German sales companies,
STADApharm GmbH and STADA Medical GmbH, will be transferred to a subsidiary
of pharmexx GmbH, Hirschberg. pharmexx has, for many years, been an
established provider of pharmaceutical sales force services for third
parties, temporarily and for a fee (so-called leasing sales force). STADA
intends to reach a contractually-fixed job guarantee with pharmexx whereby
all affected sales force employees who do not object to the company change
within the legal deadline of one month will continue to be employed by
pharmexx and will be protected from operations-related redundancies for a
period of one year.

STADA’s Chief Human Resources Officer, Dr. Alexander Oehmichen, considers
this outplacement solution, which STADA developed, a great opportunity for
the affected employees: 'In times where in all pharmaceutical sales hardly
any positions are filled, but more and more are reduced, we thereby open up
a good starting position for every employee in an established sales
organization.'

The reasons for the restructuring are long-term changes in the structures
of the German generics market due to the Act for strengthening competition
in public health insurance (GKV-WSG) which took effect on April 1, 2007.

Elements of the GKV-WSG, which are of substantial relevance for the
pharmaceutical area, target among other areas a stimulation of direct
contractual discount agreements between pharmaceutical companies, in
particular generics suppliers, and health insurance organizations. Products
without discount agreements, which are prescribed by doctors, are to be
replaced by exchangeable competitive products which are covered by discount
agreements and contain the same active ingredient (so-called substitution),
if doctors do not explicitly rule this out in each case by marking it on
the prescription. For the German generics business (sales in the first half
of 2007 totaled EUR 236.9 million, thereof a total of EUR 129.9 million by
STADApharm and STADA Medical supported sales volume) the form and the scope
of the discounts granted to the individual public health insurance
organizations and the selection of the pharmacy from among competing
products with a discount agreement are thus increasingly playing the
central role in sales, while the importance of the doctor’s product
selection and the sales measures targeted toward this is strongly
decreasing.

Since these changes in the market and demand structures have proven to be
sustained in the third quarter in the Executive Board’s view, the resulting
necessary adaptation measures in the STADA Group’s German generics sales
department have been initiated. Retzlaff on this matter: 'There is no
alternative to this adaptation. Due to the discount agreements, our
generics sales force can hardly make a difference in the market – and we
can no longer afford it in the long term since we must now pay additional
discounts to the health insurance organizations. We must therefore follow
new paths in sales.'

In this context the number of discount agreements with health insurance
organizations is to be further expanded. Furthermore, as of 2008 STADApharm
and STADA Medical will bundle their sales activities in the scope of the
restructuring and will conceptually reorganize it without own sales
employees targeting doctors. To nevertheless be able to offer, to a
reasonable extent, direct sales contact from STADA with the prescribing
doctor, leasing sales forces will probably also be made use of.
STADApharm’s existing Germany-wide pharmacy sales force will remain
unchanged and, in accordance with the great importance of pharmacies for
the selection of generics in the scope of discount agreements, will play a
central role in the future sales concept.

Other German STADA sales companies, particularly the generics sales line
ALIUD PHARMA GmbH & Co. KG which traditionally operates in the market
without a sales force and which has already concluded a high number of
discount agreements as well as STADA GmbH, which is focused on branded
products, are not affected by the planned restructuring.

The initiated restructuring was approved by the Supervisory Board yesterday
and should be completed in 2007. In this connection, STADA expects, from
today’s perspective, a one-time expense in a total amount of approx. EUR 29
million before taxes or approx. EUR 18 million after taxes, the vast
majority of which will be incurred in the third quarter of 2007. This
one-time restructuring expense will, in accordance with IFRS, be presented
as a separate line in the STADA Group’s income statement below operating
profit, which will thus not be affected by the burdens from the
restructuring.

The goal of the restructuring initiated today is by adapting the sales
structures to the changed demand mechanisms, to consistently reduce the
fixed sales costs of the German generics business in the STADA Group.
Regardless of the expected burdens on the sales-related gross margin
through existing and future discount agreements, the German generics
business should, also in the future, be able to contribute its significant
share to the operating profit of the STADA Group. The current far-reaching
changes in the structure of the German generics business will thus, from
the Executive Board’s current perspective, not lastingly influence the
sustained growth course of the STADA Group.

Retzlaff on this subject: 'As painful as the restructuring initiated today
may be: It also shows clearly how flexible STADA’s operative alignment is.
Change management in individual national markets occurs almost every day in
the generics business – and STADA does not dread the quick implementation
of such necessary changes in individual markets, if they cannot be avoided,
in the interest of the total Group and thus also in the interest of a
current total of approx. 8,000 employees worldwide. Only by means of
consistently market-oriented actions is a company able to fulfill its
obligation for success in the long term in the interest of shareholders and
all employees.'


Further information: 
STADA Arzneimittel AG / Corporate Communications / Stadastraße 2–18 / 
D - 61118 Bad Vilbel / Phone: +49(0) 6101 603-113 / 
Fax: +49(0) 6101 603-506 / E-mail: communications@stada.de
Or visit our website at www.stada.com
28.09.2007  Financial News transmitted by DGAP
----------------------------------------------------------------------
 
Language:     English
Issuer:       STADA Arzneimittel AG
              Stadastraße 2-18
              61118 Bad Vilbel
              Deutschland
Phone:        +49 (0)6101 603- 113
Fax:          +49 (0)6101 603- 506
E-mail:       communications@stada.de
Internet:     www.stada.de
ISIN:         DE0007251803, DE0007251845, 
WKN:          725180, 725184, 
Indices:      MDAX
Listed:       Amtlicher Markt in Frankfurt (Prime Standard), Düsseldorf;
              Freiverkehr in Berlin, Hannover, Hamburg, München, Stuttgart
 
End of News                                     DGAP News-Service
 
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