Aurobindo Pharma said on Thursday it was acquiring a dermatology business and a portfolio of oral solid products along with commercial and manufacturing infrastructure in the US from Sandoz Inc, USA, a Novartis division, for $900 million in an all-cash deal. The transaction positions Aurobindo as the second largest dermatology and largest generics company in the US by prescriptions. The nearly 300 products will complement its portfolio.
In a statement, the company said the cash transaction would be financed through a fully- committed debt facility. N Govindarajan, MD, said the acquisition was in line with the firm’s strategy to grow and diversify the business in the US. “This will allow us to further expand our product offering and to become a leading player in the generic dermatology market,” Govindrajan said.
The acquired generic dermatology portfolio covers topical antibiotics, gynaecological and dermatological antifungal agents, anti-acne agents, local anaesthetic analgesics, anti-itch, and a dermatological chemotherapeutic agent.
Aurobindo Pharma’s revenues in FY2018 were close to Rs 16,500 crore and it reported profits of Rs 2,440 crore. The company’s total borrowings at the end of March, 2018 stood at Rs 4482.5 crore.
Analysts have been impressed with the company’s performance in the US. Analysts at Kotak Institutional equities wrote the company’s execution in the US had been superior. This was clear, they observed, from the consistent scale-up in the US despite broader pricing pressure, as well as a diversified, volume-led product basket across orals as well as injectables.
“The portfolio being divested generated sales of $0.6 billion in HI 2018 for Sandoz. After expiration of certain in-licensed product contracts, and rationalisations of acquired products that will not negatively impact profitability (but before the impact of any potential FTC-led divestments) the portfolio is expected to generate over $0.9 billion in sales for the first 12 months after completion of the transaction for Aurobindo,” a statement said. The acquisition will be on debt-free and cash-free basis and will be made through its wholly-owned subsidiary, Aurobindo Pharma USA Inc. Aurobindo will also acquire a well-established commercial infrastructure with a fully-dedicated dermatology sales force along with a state-of-the-art manufacturing facility with specialized capabilities in creams, ointments, lotions, topical solutions and topical suspensions that are highly complementary to Aurobindo’ s current manufacturing footprint.