Zydus Lifesciences to acquire Sterling Biotech's API biz for Rs 84 crore

Zydus Lifesciences Ltd on Tuesday said it will acquire the 'Target Business' of Sterling Biotech primarily engaged in manufacturing of fermentation-based active pharmaceutical ingredients products and a production facility at Masa in Gujarat for a pre-agreed sum of Rs 84 crore.

In August this year when Zydus acquired a 50 per cent stake in Sterling Biotech Ltd (SBL), the company negotiated for the right to acquire the 'Target Business' of SBL at a pre-defined value.

"This right has been exercised by the company," Zydus Lifesciences said in a regulatory filing.

The board of directors of the company at their meeting held on September 17, 2024, have approved a business transfer agreement (BTA) to purchase the active pharmaceutical ingredients (API) business -- the Target Business -- of SBL, on a going concern basis, on slump sale basis, without values being assigned to individual assets and liabilities, on cash-free and debt-free basis at a pre-defined lump-sum consideration of Rs 84 crore, it added.

The 'Target Business' of SBL consists of a portfolio of fermentation-based API products like Lovastatin, Daunorubicin, Doxorubicin and Epirubicin. It has a turnover of Rs 66.83 crore for the financial year ended on March 31, 2024, the filing said.

On the rationale behind the acquisition of the API business of SBL, Zydus said, "...it is an excellent strategic fit for the company given that it has fermentation-based products portfolio with a manufacturing facility at Masar, near Vadodara, Gujarat which is in proximity to the company's existing facility at Dabhasa and can meet our strategic and commercial objectives."

The company is looking for a fermentation-based API business with a manufacturing facility given the high-entry barriers and attractive margin profile of such business, it added.

Zydus has a dedicated fermentation lab that focuses on the development of new products. Building a new plant through the greenfield route could be more expensive and time-consuming, the company said.

"With the said acquisition of the Target Business of SBL, the company will be in a position to meet its strategic and commercial objectives," it said, adding that the acquisition is expected to be completed by December 31, 2024.