BackCipla to acquire generic businesses in US for $550 million
Cipla's UK arm will acquire two US-based firmsInvaGen Pharmaceuticals and Exelan Pharmaceuticals
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Mumbai: Cipla EU Ltd will acquire two US-based companies, InvaGen Pharmaceuticals Inc. and Exelan Pharmaceuticals Inc., for $550 million, to strengthen its presence in world’s largest drug market.
The combined revenue from these transactions is more than $200 million for the year ended December and more than $225 million in the 12 months to June, Mumbai-based Cipla Ltd said in a statement on Friday.
The all-cash transactions will give the company scale in the US generics market through a wide ranging product portfolio in central nervous system, cardiovascular system, anti-infectives, diabetes as well as other value-added generics, Cipla said.
This is Cipla’s second large acquisition in its 80 years’ of existence. In 2013, Cipla acquired 100% stake in South African arm Cipla Medpro South Africa Ltd for ₹ 2,707 crore.
“This investment is in line with Cipla’s strategy to grow Cipla’s share in the US pharmaceuticals market. We see InvaGen as a strong strategic fit with a relevant diverse portfolio as well as a strong market and customer presence," said Subhanu Saxena, managing director and global chief executive, Cipla Ltd.
Cipla’s shares fell 1.13% to close at ₹ 649.40 in Mumbai trading on Friday, while the benchmark Sensex dropped 2.18% to close at 25,201.90 points.
In 2014-15, earnings from the US market were about 8% of annual revenue; the domestic market contributed 43% while rest of the world contributed 25% of revenue worth $1.7 billion. In the US, Cipla has filed more than 150 abbreviated new drugs applications (ANDAs), out of which 75 were approved.
“Though we are among the first drug manufacturers in India, we have missed global opportunities. Compared to other large players, who earn 50-60% of their revenue from markets such as the US, Cipla earns about 8% from the US market," Saxena had said in an interview in June.
Saxena also plans to double revenue from the US market to 15-20% by 2020.
“With these acquisitions, the US now will have sales of $400 million, accounting for almost 16-17% of its estimated earnings of FY2017," a report from Angel Broking said.
InvaGen Pharmaceuticals has 40 ANDAs, 32 marketed products and 30 pipeline products expected to be approved over the next four years. In addition, InvaGen has filed five first-to-file products, which represent a market size of $8 billion in revenue by 2018, Cipla said.
InvaGen has a factory in Hauppauge, New York, and a US-based research and development organization. “With a local manufacturing facility, Cipla can further strengthen its presence and commitment to serve patients in the country," Saxena said.
The acquisition of Exelan Pharmaceuticals provides Cipla access to the government and institutional market in the US.
“Buying out companies with an FDA (Food and Drug Administration) approved plant and a good ANDA pipeline will accelerate the growth. Creating a similar business through organic route may take another 3-4 years in the US. Today, the cash-rich Indian drug makers can afford larger outbound transactions," said Pramod Kumar, managing director of Barclays Capital India. Barclays was the financial advisor to Cipla.
Indian drug makers, whose US business have been hit by various import alerts issued by FDA, have been active in acquisitions in the US and European markets in the recent past.
Last month, Lupin Ltd, India’s fourth-largest drug maker, acquired New Jersey-based Gavis Pharmaceuticals Llc. and its affiliate Novel Laboratories Inc. for $880 million (around ₹ 5,600 crore then), as part of expanding its presence in the US generics market.
Generic pharmaceuticals make up 80% of the prescriptions dispensed in the US but account for just 27% of total drug spending. The US generic drug market is estimated at a yearly $35 billion.
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