Cipla enhances US push with 2 buys for $550 mn

With a view to enhance its presence in the world’s largest generics market, Cipla on Friday said it would acquire 100% of generic businesses of two pharmaceutical companies in the US for $550 million in a cash deal.

Cipla stake
Domestic formulations sales were flat in 3Q due to change in distribution policy. Excluding impact of distribution policy changes, domestic business grew at 11% y-o-y. Management expects this to normalize in coming quarters. (Reuters photo)

With a view to enhance its presence in the world’s largest generics market, Cipla on Friday said it would acquire 100% of generic businesses of two pharmaceutical companies in the US for $550 million in a cash deal. The targets are the privately-held InvaGen Pharmaceuticals and Exelan Pharmaceuticals, which are subsidiaries of the US-based Hetero Pharma. This would be the company’s second-biggest acquisition in its 80-year history. About two years ago it had bought South Africa’s Medpro.

Cipla, the country’s fourth largest drugmaker by sales, will as a result of these acquisitions gain multiple products in the areas of anti-infectives, diabetes and central nervous system disorders. They also give it access to the government and institutional market in the US. In fact, Cipla has been late in entering the US market and building a sizeable presence there as most of its peers have already entered this market. In July, Lupin, the country’s third largest drugmaker by sales, bought US-based Gavis Pharma for $880 million to revive its growth in the US market, the world’s largest.

Though the trend among Indian drugmakers is to move away from oral products to injectables and other complex generics as they provide higher margins, the deal brings advantages to Cipla. For instance, the acquisition of InvaGen provides the company its first R&D and manufacturing base in Hauppauge, New York, and a skilled US-based R&D organisation. The total revenue from the acquired assets stood at over $200 million for the year ended December 2014, and over $225 million in June 2015. The deal also brings Cipla about 40 approved ANDAs, 32 marketed products and 30 pipeline products that are likely to be approved over the next four years. With widespread consolidation of supply chains in the US, this acquisition strengthens its access to large wholesalers and retailers in the US.


The bulk of Cipla’s sales, about 45%, now comes from India while the US contributes just 8%. The company plans to grow the US business so that it contributes around 20% in coming years.

“This investment is in line with Cipla’s strategy to grow Cipla’s share in the US pharmaceutical market. We see InvaGen as a strong strategic fit with a relevant diverse portfolio as well as a strong market and customer presence. With a local manufacturing facility, Cipla can strengthen its presence and commitment to serve patients in the country,” said Cipla MD and global CEO Subhanu Saxena.

“InvaGen brings an experienced team and good manufacturing capabilities to the partnership. We are confident that the combination of InvaGen and Cipla will significantly enhance the product portfolio offering, including specialty products, to US patients and will give InvaGen access to Cipla’s global expertise and presence,” said Sudhakar Vidiyala, president and CEO, InvaGen.

The growth in complex generics is at twice the pace of commoditised generics. The complex generics market accounts for around 50% of the US generics market and is valued at $25 billion, with a potential to outperform the growth rate of the overall market by at least twice. However, at present domestic drugmakers garner under 15% of US revenue from sale of complex generics in the US.

For domestic drugmakers, increasing contribution of US sales from 18% in FY09 to 33% in FY14 helped them improve profitability by tapping into first-to-file opportunities and foray into limited competition products. During the period, domestic pharma firms monetised opportunities arising from rising healthcare costs and blockbuster drugs going off patent in the US market, registering a growth in sales from $1.4 billion in FY09 to $5 billion in FY14.

In fact, Indian generic drug firms have garnered an 83% share of the US generics market by strengthening their relationships with distributors and broadening the overall product portfolio.

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First published on: 05-09-2015 at 02:41 IST