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Hyderabad-based pharmaceutical major Dr Reddy’s Laboratories is going to buy a few established products from UCB, a Belgian biopharmaceutical firm, for euro 118 million (close to Rs 800 crore).
The definitive agreement for the select portfolio will allow Dr Reddy’s Laboratories to sell these products in India, Nepal, Sri Lanka and Maldives.
The acquired business is being sold on a slump sale basis. The transaction, which includes approximately 350 employees engaged in the operations of UCB’s India business, is expected to be closed in the first quarter of the 2015-16 financial year, Dr Reddy’s said on Wednesday.
According to Dr Reddy’s, the revenues of the acquired business is approximately Rs 150 crore for the 2014 calendar.
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The acquisition of UCB’s existing brand equity in the areas of dermatology, respiratory and paediatrics diseases will further expand Dr Reddy’s therapy footprint into these fast-growing areas, it said.
While the new acquisition marks a strong intent of the company to expand into high growth areas in the domestic market, there were concerns on the valuation front. “The valuation put on the acquitted business comes to 5.3 times CY2014, which is slightly on the higher side,” said Sarabjit Kour Nangra of Angel Broking.
According to Kour, the acquisition can be easily funded by the company, as the debt:equity ratio is very comfortable.
“The acquired UCB portfolio will accelerate Dr Reddy’s presence in the high-growth areas of dermatology, respiratory and pediatrics with market-leading brands like Atarax, Nootropil, Zyrtec, Xyzal and Xyzal M. We welcome UCB’s employees to our growing global team,” said Alok Sonig, senior vice-president and India business head, Dr Reddy’s.
Of late, the company has been able to achieve a good growth in the Indian market by focusing on the new product launches in addition to the prescription growth. During the December quarter, India with Rs 432 crore accounted for 14 per cent of the global generics business. It registered an year on year growth of 11 per cent during the quarter.
“Finding the right company for our established brands in India was crucial, and Dr Reddy's knowledge of the local market, combined with their ambitious plans and excellent reputation, convinced us they were the right choice to drive the business forward,” said Mark McDade, chief operating officer of UCB.
Dr Reddy’s scrip rose 1.65 per cent or Rs 57.55 to close at Rs 3,528.70 on the BSE on Wednesday.
