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Strides Arcolab considering sale of injectable drugs unit

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Bloomberg Mumbai

Strides Arcolab Ltd, a supplier of cancer-fighting drugs to Pfizer Inc, was considering selling its injectable medicines unit, three people with knowledge of the matter said.

The unit, called Agila Specialties, might be valued at more than Bangalore-based Strides’ current market value of about $800 million, two people said, declining to be identified, as the information was private. Agila’s relative success in winning approvals for new products and the scarcity of facilities that manufacture injectable medicines made it an attractive target for drug makers, they said.

“Injectables is certainly a very lucrative business because there’s less competition, flexibility in pricing, and opportunity for higher profit margin compared to just simple generics,” said Surya Narayan Patra, an analyst at Systematix Shares & Stocks Ltd. “If some big generic player is looking to ride the global injectables story, then this acquisition may look attractive.”

 

Agila’s sales rose 48 per cent to Rs 1,020 crore ($185 million) in 2011 and may expand to about $350 million by next year, according to Patra and Nitin Agarwal, a pharmaceutical analyst at IDFC Securities Ltd in Mumbai.

The unit may be valued at four to five times sales, which is in line with recent pharmaceutical transactions in India, Agarwal said. At four and a half times Agarwal’s sales estimate, Agila is worth $1.6 billion. The median multiple paid in 20 purchases of Indian pharmaceutical assets over the last five years was 4.8 times sales, data compiled by Bloomberg show.

Strides gained as much as 5.5 per cent today, and was up 3.1 per cent at Rs 767 as of 3.12 pm in Mumbai. At that price its market value is about Rs 4,500 crore.

Pfizer supplier
T S Rangan, chief financial officer at Strides, declined to comment on market speculation, in an e-mailed response to questions. A formal sale process may begin in the next few months, the people said.

Strides provides Pfizer with generic versions of off-patent drugs through a partnership announced in 2010. It received US Food and Drug Administration (USFDA) approval for oxaliplatin injection used to treat advanced cancer, the company said yesterday. The drug would be distributed in the US by Pfizer. Agila also has partnerships with GlaxoSmithKline Plc and Novartis AG, according its website.

In May 2009, Novartis AG paid about 4.7 times sales for Unterach, Austria-based Ebewe Pharma’s injectable drug unit in a $1.2-billion purchase. Mylan Inc acquired closely held injectable drug business Bioniche Pharma Holdings Ltd for $550 million in 2010, paying about 4.2 times annual revenue.

Also that year, Abbott Laboratories announced the acquisition of Mumbai-based Piramal Healthcare Ltd’s branded generic medicine unit for $3.7 billion, paying about 8.7 times sales. That sale was also for more than Piramal’s $2.5 billion market value at the time, data compiled by Bloomberg show.

Agila had the highest number of injectable-medicine approvals by the FDA for its generic drugs, with 32 from 2008 to 2010, compared with 23 at Hospira Inc, according to a May presentation.

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First Published: Aug 10 2012 | 12:41 AM IST

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