Swedish GPs cash in on pharmaceutical reform

Karin Wasteson
02 May 2013

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Since the Swedish pharmaceutical sector was reformed four years ago, private equity firms have piled into the industry. Today, those investments are demonstrating impressive returns.

For almost 40 years, Sweden was one of the few countries in the world where private retail of pharmaceuticals was banned. Privatised by the centre-right party in late 2009, a majority of the government-owned pharmacies were rebranded in 2010 as they were transferred to new owners.

This gave private equity firms the opportunity to take over the newly privatised pharmacies. At the time of completing the pharmacy sell-off, three of the major chains were owned by private equity firms: Apoteket Hjärtat by Altor, Medstop Holding AB by Segulah and Vårdapoteket i Norden AB by Investor and Priveq.

Stockholm-based firm Segulah secured the purchase of 62 of the formerly state-owned pharmacies through Medstop Group Holding AB. At the beginning of April, Segulah sold Medstop to Oriola-KD, a Finnish pharmaceutical retail and wholesale company that operates in Finland, Sweden and Russia.

The transaction, which is expected to be completed in the second quarter of 2013, values the company at SEK 1.46bn including a conditional earn-out payment. Following the acquisition, Oriola-KD will have around 300 pharmacies in Sweden and its share of the Swedish pharmacy retail market will increase from 14% to approximately 21%.

In 2009, Oriola-KD Corporation, via its company Kronans Droghandel Retail AB - together with joint owner Kooperativa Förbundet (KF) - acquired 100% of the shares in the second cluster of pharmacies at the time of deregulation, officially known as Pharmacy Company Sweden 2 AB.

Healthy investment
Another healthcare exit took place in mid-April this year. Following the de-regulation, or re-regulation of the Swedish pharmacy market, Vårdapoteket i Norden bought 24 pharmacies located near hospitals. Its private equity owners Investor Growth Capital and Priveq Investment agreed to sell their holdings in pharmacies operator Vårdapoteket to Apotek Hjärtat on 16 April.

Based in Malmö, Vårdapoteket was the first player that broke the de facto monopoly that Apoteket AB held in the pharmaceutical market. Since its inception in 2010, the chain has grown from the original 24 outpatient pharmacies to its current 27 pharmacies. Apotek Hjärtat, owned by Altor Equity Partners, is today the largest independent pharmacy chain after Apoteket AB, with slightly more than 270 pharmacies and around 2,000 employees.

Since the monopoly of state-owned Apoteket AB ended, the number of pharmacies in Sweden has increased by around 345.

Despite the two major exits in the healthcare sector, the Nordic private equity market's first quarter in 2013 saw lower activity than the same period last year overall.