Sun Pharma buys Phlox, a sick bulk drug producer

Sun Pharmaceuticals announced its acquisition of Phlox Pharmaceuticals, a sick, Vadodara-based bulk drug manufacturing company, for an undisclosed amount.

Sun intends to use Phlox as its vehicle to re-enter the cephalosporin market, which it had exited around two years back.

"We are looking at new generation, advanced cephalo-sporin products," said a spokesperson of Sun.

She said the valuation of the deal is yet to be finalised and approved.

The acquisition will also help Sun leverage the product filings of Phlox and enter Europe.

An analyst with a Mumbai brokerage said, "Sun can utilise the cephalosporin capacities of Phlox to enter the statins market in the US and Europe instead of targeting cephalosporin as a product category."

The Sun spokesperson explained that while the company is looking at manufacturing high-end cephalosporin products in the immediate future, to produce statins, it will have to incur capital expenditure.

A fermentation facility is necessary to manufacture statins. At present, Sun does not have one, and this was one of the reasons why it was trying to acquire Hindustan Antibiotics earlier.

Phlox, which had been referred to the Board for Industrial and Financial Reconstruction, reported Rs 4.8 crore income from operations for the year ended September 30, 2003. The company has a paid-up capital of Rs 23.47 crore.

Sun's board has approved the merger and the draft rehabilitation scheme for Phlox. The swap ratio would be finalised in due course.

The merger and the draft rehabilitation scheme will be subject to the approval of the company's shareholders, BIFR and other statutory authorities.

The Sun board will convene an extraordinary general meeting of shareholders on July 31 to seek permission for the merger and the swap ratio.

The Sun scrip closed 2.07 per cent up at Rs 368.15 on the Bombay Stock Exchange on Tuesday.