Indian drug major Cipla Ltd has agreed to acquire two US-based companies—InvaGen Pharmaceuticals Inc and Exelan Pharmaceuticals Inc—for around $550 million (Rs 3,650 crore) in cash, it said on Friday.
The deal, one of the biggest overseas buys by an Indian drugmaker, has been routed through its UK arm Cipla EU that has signed definitive agreements with the two companies for the acquisitions, subject to certain closing conditions.
This is the second-big overseas acquisition by an Indian drugmaker in almost as many months. In late July, Lupin said it will buy American generic drugmaker GAVIS for $880 million in the biggest international M&A by an Indian pharma firm.
Cipla would pay $500 million for InvaGen and $50 million for Exelan. The transaction is expected to be completed by end of December 2015.
“We see InvaGen as a strong strategic fit with a relevant diverse portfolio as well as a strong market and customer presence. With a local manufacturing facility, Cipla can strengthen its presence and commitment to serve patients in the country," Cipla's MD and global CEO Subhanu Saxena, said.
The acquisition of the two companies will help Cipla strengthen its presence in the US generic markets through a wide range of products portfolio in CNS, CVS, anti-infectives, diabetes as well as other value added generics, it said.
For 12 months ended on June 30, 2015, the two target firms recorded a combined revenue of over $225 million.
Barclays Group is acting as financial advisor while Hughes Hubbard & Reed LLP is acting as legal advisor to Cipla in this deal. Jefferies is acting as an exclusive financial advisor and Manatt, Phelps & Phillips, LLP is acting as legal advisor to InvaGen.
InvaGen was co-founded by two Indian origin entrepreneurs Sudhakar Vidiyala (president and CEO) and Madhava Reddy (COO) in 2003. Vidiyala holds PhD in Chemistry with post-doctoral fellowship from Temple University Philadelphia and has more than 20 years of experience in generic pharmaceuticals industry in various positions. He was serving as director in Sandoz, a Novartis group firm, prior to founding InvaGen.
Reddy has a master’s in Pharmacy and has more than 25 years of experience in pharmaceutical industry. He has worked in various capacities at Pfizer and Wyeth before joining InvaGen.
InvaGen has a large manufacturing base in Hauppauge, NY, and a skilled US-based R&D (research and development) organisation. This is Cipla’s first such presence in the US.
The acquisition of InvaGen provides Cipla with an access to large wholesalers/retailers in the US and about 40 approved ANDAs, 32 markets products and 30 pipeline produces, which are expected to be approved over the next four years. Besides, InvaGen has also filed five first-to-file products that represent a market size of around $8 billion in revenue by 2018.
Its dosage forms include immediate release, modified release and extended release tablets and capsules. With a manufacturing footprint of around 350,000 sq ft of GMP area, InvaGen has three units located in Long Island, New York, with a total production capacity of 12 billion tablets and capsules per annum and about 500 employees.
It grew its turnover from $130 million to $190 million between 2012 and 2014.
On the other hand, the acquisition of Exelan Pharmaceuticals, based in Delaware, provides Cipla access to the government and institutional market in the US. It is a privately held sales and marketing company, with a focus on generic pharmaceuticals. Exelan began operations in 2012 and sells products manufactured by InvaGen to government buyers. Its turnover rose from $2 million to $28 million between 2012 and 2014.
Cipla revs up inorganic expansion, adds to top team
Cipla revived its inorganic expansion strategy in 2013 when it acquired its distribution partner in South Africa—Cipla Medpro South Africa Ltd—for $512 million. This was the company’s first acquisition since 2010 and came a year after the company brought in Saxena as its CEO.
It has been furiously buying companies since then.
Most recently, Cipla decided to acquire 51 per cent equity stake in Uganda-based Quality Chemicals Ltd (QCL) for $30 million (around Rs 191 crore) in tranches from its existing shareholders. In April, it inked a deal to acquire Duomed Produtos Farmaceuticos Ltd, a two-year-old importer and distributor of pharma products in Brazil, for R$ 1.29 million (Rs 2.6 crore or $418,000), as part of its front-end strategy and to expedite its product registrations in Brazil. In February, it bought majority stake in respiratory devices company Jay Precision Pharma.
Earlier this year, Cipla also entered into a joint venture agreement with two of its existing business partners in Morocco—Societe Marocaine De Cooperation Pharmaceutique (Cooper Pharma) and The Pharmaceutical Institute (PHI). It is expected to invest $15 million in this venture.
Meanwhile, it roped in Fidelity Growth Partners India, a PE unit of asset management giant Fidelity, as an investor in its consumer healthcare business.
In another development, Cipla has appointed Umang Vohra and Prabir Jha as its global chief financial officer and the global chief people officer respectively.
Vohra will be responsible for strategy, portfolio, business development, mergers and acquisitions and business technology. He was working as head of the North America business for Dr. Reddy's and was instrumental in growing the company's business by over 60 per cent to cross a $1 billion mark in the US market.
Prior to that, he was the global CFO of Dr. Reddy’s for four years and has in the past worked with PepsiCo and Eicher Motors.
Jha, who takes over as new HR head, was previously with Reliance Industries and has in the past also served as head of HR in Tata Motors. He joined the corporate sector after a 10-year in stint in civil services.
In addition to providing leadership to the HR function globally for the company, he will lead the corporate communications and administration functions at Cipla.
He takes over from Samina Vaziralli, executive director of Cipla who has been interim head of HR. Samina is daughter of Cipla vice chairman MK Hamied and niece of chairman YK Hamied.