Piramal Enterprises may sell contract pharma business in $1 billion deal
Ajay Piramal’s Piramal Enterprises is said to be working with advisers to gauge interest in Piramal Pharma Solutions
New Delhi: Piramal Enterprises Ltd is weighing the sale of its contract pharmaceutical business in a potential deal worth about $1 billion, Bloomberg reported, citing unidentified people. Piramal Pharma Solutions, the contract development and manufacturing arm of Piramal Enterprises, offers services from drug discovery to development as well as commercial manufacturing, with operations in North America, Europe and Asia.
The report said Piramal Enterprises is working with advisers to gauge interest in the business.
The company has sent out preliminary marketing materials to potential buyers, according to the report.
While Piramal did not comment, people aware of the development said Piramal Pharma has received interest from private equity companies.
“We do not comment on market speculations,” said a spokesperson for Piramal Enterprises.
Pharmaceutical analysts said Piramal’s move is aimed at “unlocking the value”of the “low-margin” and “asset-heavy” business.
“If you look at the history of Piramal, you will know they are more like bankers. They will move out of business if they get good money. Moreover, this is B2B, a low-margin, asset-heavy business. Though it is a good business but going forward their real business is over the counter (OTC) drugs, among others. I am assuming that the driver to take this decision or the driver to sell this business could simply be to unlock value,” said a Mumbai-based analyst on condition of anonymity.
Piramal’s contract development and manufacturing solutions has about $70 million to $80 million of annual earnings before interest, taxes, depreciation and amortization (Ebitda), according to the people.
“This business doesn’t fit with their strategy, so probably they will unlock some cash and put them into more profitable business,” added the analyst.
With a pool of 450 scientists, including 155 PhDs, across the globe, Piramal’s contract operations offers specialized services like development and manufacture of pharmaceutical ingredients, antibody drug conjugation and are well versed in technologies such as bio-catalysis.
“Our capability as an integrated service provider and experience with various cutting-edge technologies, enables us to effectively serve innovator and generic companies worldwide,” the company says in its website.
“If they are trying to exit the business, I believe this is an opportunist step as, currently, the pharmaceutical sector is under pressure. The pharmaceutical outsourcing business or a contract research and manufacturing services is on the up move and that is why Piramal is trying to get a better deal,” said Surya Patra, vice president, healthcare research at PhillipCapital (India) Pvt. Ltd.
In 2010, Piramal Enterprises had sold its branded generics unit in India to Abbott Laboratories for $3.7 billion. In 2012, the company invested about ₹6,000 crore in Vodafone’s Indian subsidiary for an 11% stake. Any transaction will add to the $3.8 billion of healthcare services deals involving Indian companies this year, data compiled by Bloomberg shows.
On Tuesday, Piramal Enterprises shares rose 3.4%, or ₹77.75, to ₹2,329 on the BSE while the benchmark Sensex gained 0.85%, or 297.38 points, to end the day at 35,162.48.
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