Sun Pharmaceutical, the country’s largest drugmaker by sales, said on Tuesday that it has agreed to buy GlaxoSmithKline’s opiate business in Australia to strengthen its pain management portfolio. The business consists of analgesics made from raw materials found in opium poppy plants and includes two manufacturing sites in Tasmania and Victoria. The company did not disclose the financial details of the deal. The transaction, subject to requisite regulatory and other approvals, is expected to close by August 2015.
“The current GSK Opiates business, including manufacturing sites in Latrobe (Tasmania) and Port Fairy (Victoria), and its portfolio of opiates products along with inventory, will transfer to a subsidiary of Sun Pharma,” Sun Pharma and GSK said in a joint statement.
Sun Pharma has three plants in Hungary, Tennessee, and New Jersey for manufacture of controlled substances API and finished dosage.
Sun Pharma said, “The acquisition is a part of our strategy towards building our portfolio of opiates and accessing strong capabilities in this segment.”
GSK Australia is a leading supplier of medicinal opiate and has a market share of approximately 25%. The deal will allow GSK to simplify its operations in Australia, and focus on developing the company’s innovative product portfolio that, it says, “will be central to the company’s growth strategy in the country”.
The US opioid analgesics market is worth around $10 billion. According to a Jefferies report, the production of opiates is regulated under controlled substances, and as a result there are limited players in the market. This deal provides vertical integration and strengthens Sun Pharma’s presence in the controlled substances business.
Jefferies’ analysts expect Sun Pharma’s US and RoW (rest of the world) businesses to recover post third-quarter weakness. “We expect Sun to use its balance sheet to continue strategic acquisitions with small deal sizes. The key risk in the near term is adverse FDA action on the Halol facility,”says the Jefferies’ report.
The Sun Pharma scrip gained 2.01% to close at R942.40 on the BSE on Tuesday.