BackLupin to acquire US generics firm Gavis for $880 million
The acquisition will enhance Lupin's pipeline in dermatology, controlled substance products and other high-value and niche generics
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Mumbai: Lupin Ltd, India’s fourth largest drugmaker, has agreed to acquire New Jersey-based Gavis Pharmaceuticals Llc. and its affiliate Novel Laboratories Inc. for $880 million (around ₹ 5,600 crore), seeking to expand its presence in the US generics market.
The acquisition “broadens Lupin’s pipeline in dermatology, controlled substance products and other high-value and niche generics", Lupin said in a statement to the BSE on Thursday.
Mumbai-based Lupin is seeking to bolster its presence in the US, its largest market, where its sales fell 31% from a year ago to $180 million in April-June, leading to a net profit decline of 16% to ₹ 525 crore. The company reported a 6% drop in sales to ₹ 3,070 crore in the quarter to 30 June.
Closely held Gavis had sales of $96 million in the last financial year and over 250 New Jersey-based employees, Lupin said in its statement. The company develops, manufactures and distributes pharmaceuticals.
The company’s New Jersey-based manufacturing facility will become Lupin’s first manufacturing site in the US, the statement said. Lupin’s acquisition valued Gavis at about nine times its annual sales.
Gavis has 66 abbreviated new drug application filings pending approval with the US Food and Drug Administration (FDA), representing a potential market value of $9 billion, and a pipeline of 65-plus products under development to which Lupin will gain access.
“This is a time of globalization for the speciality pharmaceutical industry and Gavis is well positioned to capitalize on this exciting opportunity," said Veerappan Subramanian, founder and CEO of Gavis.
“Joining forces with Lupin, a truly global player, will help realize our vision of building a broader, research-based, high value, speciality business through organic growth," he added.
The buyout comes against the backdrop of several Indian drug makers coming under the FDA’s scanner, which has made it more difficult for them to get approvals in the world’s biggest pharmaceutical market. The US generic drug market is estimated at a yearly $35 billion.
Nine top Indian companies—Lupin,Aurobindo Pharma Ltd, Cadila Healthcare Ltd, Sun Pharmaceutical Industries Ltd, Cipla Ltd, Glenmark Pharmaceuticals Ltd, Wockhardt Ltd, Dr Reddy’s Laboratories Ltd and Torrent Pharmaceuticals Ltd—received 56 approvals in the year ended 31 March, down from 108 in the previous year, according to a July report by Icra Ltd.
The acquisition allows entry into a “highly regulated market and offsets business constraints such as long gestation for product approvals and price erosion", said Narayan Shetkar, a director at investment bank Singhi Advisors.
“The market’s size and the absence of price controls are likely to support the revenue growth and profitability," said Shetkar.
Generic pharmaceuticals make up 80% of the prescriptions dispensed in the US but account for just 27% of total drug spending. Generic products saved the US health system nearly $1.5 trillion over the past 10 years (2004-2013), according to the Generic Pharmaceutical Association.
Lupin said it expects Gavis to contribute to earnings in the first full year after purchase.
Lupin shares fell 5.23% to ₹ 1,728.60 on the BSE on a day the benchmark Sensex dropped 0.47% to 28,370.84 points.
Reuters contributed to this story.
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