Adcock Ingram to sell loss-making India unit Cosme

South African drugmaker Adcock Ingram has put its loss-making Indian arm on the block just three years after acquiring the pharmaceutical brands of privately held Cosme Farma Laboratories Ltd for Rs 480 crore ($86 million).

This would mark the exit of another multinational drugmaker from India. In April, Japanese drugmaker Daiichi Sankyo sold entire holding of 8.9 per cent in India's top pharmaceuticals firm by market value Sun Pharmaceutical Industries Ltd. It closed the chapter of its fairly aggressive move to enter the country seven years ago by acquiring Ranbaxy at a significant premium to its then market value. Ranbaxy merged with Sun Pharma early this year.

Meanwhile, Adcock Ingram said it will kick-start the sale process soon.

In an official statement along with its corporate results for the last financial year, the firm said: “South African business did well and showed improved profitability; the rest of Africa and Indian businesses continue to post losses. Downsides included a further impairment of R74.4 million to Cosme business in India.  As a result, the board has resolved to dispose of this investment at the earliest opportunity and a formal sale process will soon be started for this purpose.”

Adcock Ingram had acquired Cosme Farma in July 2012. The all-cash deal involved acquisition of Cosme Farma’s portfolio in areas like dermatology and gynaecology besides the marketing assets of the Indian pharma firm.

At the time of the deal, Goa-based Cosme Farma was a mid-sized pharmaceutical business with a sales force of approximately 1,000 and providing coverage to 150,000 physicians. It had distribution capabilities in 27 states across categories like gynaecology, gastro-intestinal, dermatology and orthopaedic. The firm was owned by Cosme Menezes.

“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 helps us take a step towards realising that strategy,” Andy Hall, Adcock Ingram’s deputy CEO and financial director had said back then. It also gave the South African pharma company an established sales and distribution platform to launch the Adcock Ingram brands.

Adcock Ingram also had a manufacturing presence in India since 2007 through a joint venture with its Bangalore-based outsourcing partner Medreich Ltd. Last year Japan's Meiji acquired Medreich.

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 had revenues of around $421 million last year, up 6.5per cent in its reporting currency to ZAR 5.5 billion.

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