BackGland Pharma’s European acquisition to enhance reach, offerings
Given that Cenexi has capabilities in processing substances such as hormones, suspensions, and controlled substances, it would expand Gland Pharma’s overall offerings to its customers
PremiumGland Pharma, a generic injectable-focused contract drug manufacturing company, has entered into a put option agreement to acquire 100% of Europe-based Cenexi Group. The company, through its wholly owned Singapore-based subsidiary Gland Pharma International PTE, will buy Cenexi for euro 120 million (around ₹1,015 crore).
The acquisiti would provide the company with the technical know-how in sterile forms, including ophthalmic gel, needleless injectors, and hormones, said analysts. As the acquisition fulfills the need for local presence to gain business in European markets, it is looked at in a positive light by analysts.
Also, given that Cenexi has capabilities in processing substances such as hormones, suspensions, and controlled substances, it would expand Gland Pharma’s overall offerings to its customers, said analysts at Motilal Oswal financial Services Ltd (MOFSL)
The acquisition for an equity value not exceeding euro 120 million (Enterprise Value of Euro 230 million), is looked at in line with the generic business valuations. As per analysts at MOFSL the Enterprise value to sales ratio stands at about 1.2 times CY21 and CY22 estimates and the EV to EbitdA is about 10 times CY21 and 8 times CY22 estimated earnings. Ebitda stands for Earnings before interest tax depreciation and amortization.
Analysts at Kotak Institutional Equities expect Cenexi to constitute 25%, 15% of the combined entity’s FY2024 sales and Ebitda respectively. However, they said, apart from higher scale, they see limited benefits from this deal for Gland. The concerns of the analysts are around Cenexi’s flat sales growth. Also given the European manufacturing base, the company's margin is unlikely to scale up to Gland’s level even in the long run, feel analysts at Kotak Institutional equities.
Cenexi’s Ebitda margin has improved to 19% in first half CY22 from 9.7% in CY19. However, analysts said that the management has indicated that the first half of CY22 margins are not the normalized rate of Ebitda margin. Notably, these remain lower than Gland Pharma’s Ebitda margin of 31.5% for first half CY22.
The stock prices of Gland Pharma declined more than 4% in morning trades on Wednesday.
Clearly, the turnaround of acquired assets will be looked at eagerly to add to market confidence.
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