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Mylan pays $1.6bn for Strides arm

Mumbai, March 1: US-based Mylan Inc is buying the specialties subsidiary of Strides Arcolab for $1.6 billion (Rs 9,000 crore) ' the deal is the third largest in Indian pharmaceuticals and shows the growing interest of drug multinationals in local companies that have the strength to penetrate regulated markets such as the US.

Mylan has pipped giants such as Pfizer Inc, Novartis AG and other multinationals to Agila Specialties Pvt Limited, the subsidiary of Bangalore-based Strides.

They were attracted by the huge potential of Agila's injectable business, where margins are high.

Only Japan's Daiichi Sankyo and US's Abbott have paid more than Mylan for an Indian drug company.

Daiichi bought a large stake in Ranbaxy Laboratories for about $5.45 billion in 2008, while Abbott acquired the formulation business of Piramal Healthcare (now Piramal Enterprises) in 2010 for $3.72 billion.

The deal, announced on Thursday, includes Agila as well as its overseas specialties subsidiary based in Singapore.

Agila recorded sales of $255 million for the year ended December 31, 2012.

"The acquisition of Agila will create a global injectables leader, significantly expanding and strengthening Mylan's global injectables platform and providing Mylan entry into new high-growth geographic markets," the company said in a statement.

Under the terms of the agreement, Strides and its subsidiary will receive an aggregate sum of $1.6 billion in cash on closing and a potential additional consideration of up to $250 million, subject to the satisfaction of certain conditions by Strides.

Strides said the funds would be used to pay off debts, and it would give a pre-tax return of $700-800 million to shareholders.

The company added that it would continue to operate and develop its pharmaceutical business in India and Africa; it would also focus on developing a fully integrated biotech business, which will be fully funded after the Mylan transaction.

Agila is into injectibles and focused on key domains, including oncolytics (anti-cancer), penicillin, cephalosporins and ophthalmics in India and overseas.

Agila will bring Mylan a broad product portfolio of more than 300 filings approved globally and marketed through a network covering 70 countries, including 61 abbreviated new drug applications approved by the US Food and Drug Administration. It operates from nine global manufacturing facilities.

Mylan, which is the third largest generic pharmaceutical company, has huge expectations from the deal. Heather Bresch, CEO of the company, said the acquisition would form a major step in realising its goal of becoming among the top three in the global injectables market.

"The addition of Agila to Mylan's existing injectables platform will immediately create a new, powerful global leader in this fast-growing, attractive market segment. Importantly, Agila will bring Mylan one of the most state-of-the-art, high-quality injectables manufacturing platforms in the industry,'' Bresch added.

Strides Arcolab executive vice chairman and group CEO Arun Kumar said: "We believe Agila, its partners, customers and employees across all of its markets will benefit significantly from Mylan's global reach and strong position in the global generic and specialty pharmaceutical sector."

The transaction is subject to customary conditions, including the receipt of required regulatory approvals.

Jefferies International Ltd is acting as a sole financial adviser to Strides Arcolab.

However, the Strides stock ended in the negative territory on the stock exchanges today.

On the Bombay Stock Exchange, the share finished with losses of 5.10 per cent to close at Rs 870.95. Market circles said the negative reaction came as the consideration paid came below expectations of around $2 billion.

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