Cosme Farma Laboratories Ltd

Adcock Ingram buys Cosme Farma’s drug portfolio for $86M

20 July, 2012

South Africa’s Adcock Ingram has acquired the pharmaceutical brands of privately held Cosme Farma Laboratories Ltd for Rs 480 crore ($86 million). The all-cash deal will see the acquisition of Cosme Pharma’s portfolio in areas like dermatology and gynaecology besides the marketing assets of the Cosme Farma group.

The deal includes payment of 90 per cent cash upfront, with the remaining 10 per cent to be paid in the next six months.

According to a Reuters report, the transaction has been done at a premium of nearly 13 times Cosme’s earnings before interest, tax, depreciation and amortisation (EBITDA). Cosme had a profit before tax of Rs 19.6 crore for the six month period ended March 31, 2012.

Goa-based Cosme Farma is a mid-sized sales and marketing pharmaceutical business with a sales force of approximately 1,000 and providing coverage to 150,000 physicians. It has distribution capabilities in 27 states across categories like gynaecology, gastro-intestinal, dermatology and orthopaedic.

“In line with our growth strategy, we have identified India as a key growth market where we need to position ourselves for the sustainability and diversification of the business and this transaction sees us take a step towards realising that strategy,” said Andy Hall, Adcock Ingram’s deputy CEO and financial director.

“We have nurtured and built these brands over four decades. We are confident that Adcock Ingram, as a reputable multinational, will take these brands to higher levels of sustainable growth in the Indian pharmaceutical market,” said Cosme Menezes, the current owner of Cosme Farma.

Adcock Ingram has a manufacturing presence in India since 2007 through a joint venture with its Bangalore-based outsourcing partner Medreich Ltd. It has recently opened a local sales, marketing & administration office, headed by Pravin Iyer, and has been looking for an acquisition in the fast-growing market.

According to IMS Health, the high-growth Indian pharmaceutical market with a current spend of $16 billion is expected to grow at a compound annual growth rate of 16 per cent during 2011-2016.

The deal also gives Adcock Ingram access to fast-growing dermatology and gynaecology segments with brands having a presence for 40 years in the country. It will give the South African pharma company an established sales and distribution platform to launch the Adcock Ingram brands.

Adcock Ingram is present in both pharmaceutical and hospital products businesses with 10 per cent share of the private pharmaceutical industry in South Africa. The company has revenues of over Rs 3,000 crore or $550 million.

There have been several blockbuster sell-offs by Indian promoter groups in the pharmaceuticals space. Four years ago, Japan’s Daiichi Sankyo acquired over 51 per cent stake in Ranbaxy Laboratories Ltd in a $4.6 billion transaction. And two years ago, Abbott followed with over $3.72 billion deal to acquire the domestic formulations business of Piramal Healthcare.

(Edited by Sanghamitra Mandal)

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Adcock Ingram buys Cosme Farma’s drug portfolio for $86M

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