Rs 1,850-crore deal: Dr Reddy’s to buy part of Wockhardt generics business

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Published: February 13, 2020 6:00:34 AM

According to a statement from Wockhardt, the businesses which are being transferred, reported revenue of Rs 377 crore which is about 15% of the consolidated revenue for nine months ended December 31, 2019.

The business undertaking is being transferred on a slump sale basis.The business undertaking is being transferred on a slump sale basis.

Dr Reddy’s Laboratories will acquire select divisions of Wockhardt’s branded generics business in India and a few other international territories of Nepal, Sri Lanka, Bhutan and Maldives for a consideration of Rs 1,850 crore. The two sides have signed a definitive agreement to this effect on Tuesday, according to a statement.

The business comprises a portfolio of 62 brands in multiple therapy areas such as respiratory, neurology, dermatology, gastroenterology, pain and vaccines, which would be transferred to Dr Reddy’s along with related sales and marketing teams and the manufacturing plant located in Baddi, Himachal Pradesh. The business undertaking is being transferred on a slump sale basis.

Analysts say that the deal works well for both Wockhardt and Dr Reddy’s. For Wockhardt, it has created a space for tomorrow’s business as the funds raised will be used to improve its liquidity position with the company aiming for double digit growth next year. For Dr Reddy’s, the acquisition will help boost its portfolio outside the US market and brand acquisitions will improve its position in the Indian market.

India is an important market for us and this acquisition will help in considerably scaling-up our domestic business. The acquired portfolio shall enhance Dr Reddy’s presence in the high growth therapy areas with market leading brands such as Practin, Zedex, Bro-zedex, Tryptomer and Biovac,” GV Prasad, co-chairman and MD, Dr Reddy’s, said in a statement. “We believe the portfolio holds a lot of potential and will get an impetus under Dr Reddy’s,” he added. The transaction is expected to be closed in the first quarter of the financial year 2020-21.

According to a statement from Wockhardt, the businesses which are being transferred, reported revenue of Rs 377 crore which is about 15% of the consolidated revenue for nine months ended December 31, 2019. The proposed divestment is about 3.8 times of annualised revenue of the business being transferred. “The intended sale of business portfolio is in line with the company’s strategic plan to shift from acute therapeutic areas to more chronic business like anti-diabetes, CNS, etc and also to its niche antibiotic portfolio of new chemical entities (NCEs). The divestment will also ensure adequate liquidity to bring in robust growth in the chronic domestic branded business, international operations, investments in biosimilars for the US market apart from the company’s global clinical trials of break-through anti-infectives (NCEs approved under coveted qualified infectious disease products (QIDP) programme of United States Food and Drug Administration and R&D activities,” Dr Habil Khorakiwala, founder chairman, Wockhardt group, said.

The sale of business will enable Wockhardt to have adequate liquidity for robust growth in international operations and investments in biosimilars for the US market, augment remaining significant domestic branded business portfolio of the company and re-focus towards chronic segment with differentiated product portfolio; continue its ongoing research and development activities; necessary action for completion of clinical trials of the company’s breakthrough of NCEs in the anti-infective space, duly approved by coveted QIDP Programme of USFDA and strengthen the balance sheet.

Post the proposed sale, Wockhardt will continue to own all international operations in the UK, US, Ireland and other locations through its step-down subsidiaries. Besides, the formulation plants located at Waluj, Shendra and Chikalthana in Aurangabad, Bhimpore and Kadaiya in Daman; bulk drugs plant at Ankleshwar and manufacturing facilities at all existing international locations will be retained. The research and development centres located at Chikalthana and Aurangabad and existing facilities at the international locations and a significant part of domestic branded business, constituting chronic and speciality portfolios, will remain with the company.

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