Buyout will boost capacity for speciality injectable business
Strides Arcolab, a Bangalore-headquartered pharmaceutical company, today announced that it would acquire South Africa-based generics firm Aspen’s production unit in Brazil for $75 million in an all-cash deal.
The acquisition, subject to regulatory approvals, is expected to be sealed within 90 days and will boost Strides’ capacity for speciality injectable business.
The purchase includes all related products and intellectual property rights of the facility that makes Penicillin and Penems. The facility is forecasted to deliver $40 million on an annualised basis and was divested to Aspen in 2007, at the time when the company exited from LATAM operations. Penems are administered to patients with various forms of allergy and to those not comfortable with Penicillins.
“Penems and Penicillins form an important part of Strides speciality injectable business and licensing agreements for Penems have been concluded with various customers on a worldwide basis, making the acquisition an important part of growing our speciality injectable business,” said Arun Kumar, vice-chairman and Group CEO, Strides. The company also has an equal joint venture with Aspen for oncology drugs.
Analysts said Strides’ move to buy back the plant in Brazil was based on an urgent need to meet a long-term supply contract the company entered into a few months ago with Pfizer, the world’s largest drug company.
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“It is not easy to quickly set up a new plant and Brazil is also a low-cost manufacturing destination like India. Further, Brazil is much closer to the US than India, and it makes sense to buy a plant in Brazil than shipping entire supplies from India,” said Ranjit Kapadia, vice-president (institutional research) of HDFC Securities.
Strides, which reported a top line of Rs 1,320 crore for the year ended December 2009, supplies injectables to global pharma majors, including Pfizer, GlaxoSmithKline, Sandoz and Novartis, and derives 27 per cent of its top line from this vertical.
With this acquisition, Strides will have seven units under its fold to churn out injectables. According to company officials, funding for this acquisition will be met through internal accruals and debt.
Strides in its outlook for 2010 noted that this vertical is expected to grow 50 per cent, backed by a licensing and supply agreement with Pfizer which was announced during January 2010.