Kemwell talks stake dilution with PE firms, eyes buyouts

Kemwell talks stake dilution with PE firms, eyes buyouts

Stockholm / New Delhi: Kemwell Pvt. Ltd, a leading provider of contract manufacturing and development services for pharmaceutical products in India and Sweden, is in talks with private equity (PE) funds for diluting its stake.

It is also looking at acquisitions in Sweden and the US.

Explaining the rationale behind such future acquisitions, PerAke Oldentoft, board member, Kemwell AB said, “It is much more expensive to set up a greenfield facility. It also saves time and money."

Kemwell AB is the Swedish arm of Kemwell Pvt. Ltd. It already has a manufacturing facility at Uppsala in Sweden, which employs 170 people and manufactures active pharmaceutical ingredients, tablets, capsules and suppositories. In addition to its Swedish facility, the company also operates four manufacturing facilities in Bangalore.

The company says its strategic moves will help it take a crack at the global market for contract manufacturing of prescription drugs, which is estimated to grow to $43.9 billion (Rs1.8 trillion) in 2009. A study by audit firm KPMG , on the Indian pharmaceutical industry’s collaboration for growth, argues that India and China alone could potentially account for 35-40% of the outsourced market share for active pharmaceuticals ingredients, finished dosage formulations and intermediates.

“It is challenging to supply to Europe and America from an Indian facility only. By diversifying geographically, we would be able to minimize risk. Instead of building new factories, investing in existing facilities adds to know-how quickly, and Sweden is known for its high quality and manufacturing standards," said Anurag Bagaria, vice-president, business development, Kemwell.

“We are also talking to PE funds for taking stake. It is in the initial stages," Bagaria added. He declined to comment further, citing commercial considerations.

In another development, Kemwell plans to build a biologics facility in Bangalore at an investment of $50 million.

A biologic is any therapeutic serum, toxin, antitoxin, vaccine, virus, blood or blood component that is used in the prevention, treatment or cure of injuries or disease.

“The money that would be put in by the PE funds will contribute towards building up this facility. By setting up this facility in India, we would be able to save two-thirds of the costs," Bagaria added.

Kemwell is one of the largest formulations contract manufacturers in India and posted a turnover of $65 million in 2006-07. Its customers include Pfizer, AstraZeneca, Bayer, GlaxoSmithKline Ltd, Johnson & Johnson Ltd and Novartis AG.