Dr Reddy’s Labs to buy select branded drugs of Belgium’s UCB in South Asia for $128M

Hyderabad-based Dr Reddy's Laboratories Ltd, India's second-largest drugmaker by sales, has agreed to acquire a portfolio of established brands of Belgium-based pharmaceutical firm UCB in India, Nepal, Sri Lanka and Maldives for Rs 800 crore (approximately $128 million), as per a stock marker disclosure.

The established products business of UCB—which has operations in nearly 40 countries with revenues of €3.3 billion in 2014—is expected to help Dr Reddy's strengthen its presence in the areas of dermatology, paediatrics and respiratory verticals with brands like Atarax, Nootropil, Zyrtec, Xyzal, Xyzal M, etc, said Alok Sonig, senior vice president and India business head of Dr Reddy's.

The target unit has 350 employees and generated revenues of approximately Rs 150 crore for calendar year 2014.

The transaction is expected to be closed in the current quarter.

“Finding the right company for our established brands in India was crucial, and Dr Reddy's knowledge of the local market, combined with its ambitious plans and excellent reputation, convinced us they were the right choice to drive this business forward,” UCB's chief operating officer Mark McDade said.

He said the deal allows UCB to focus on its key neurology business in India.

UCB is a bio-pharmaceutical company focused on the discovery and development of medicines for ailments affecting the immune and central nervous systems. It employs 8,500 people in around 40 countries.

For Dr Reddy's, this deal shows it has found its lost appetite for large deals after a mega deal in Europe turned out to be a disaster around a decade ago. The company's last big buy was in 2006 when it bought Germany's Betapharm which continues to bite the firm.

One of the main attractions that encouraged Dr Reddy's to buy Betapharm was getting access to its branded generics business in the home market. This was nullified due to the change in the drugs procurement policy of the German government. The deal also added debt on the books of Dr Reddy's.

It has sewn a few M&As post that but those were in the sub $50 million range, as per data collated by VCCEdge, the data research platform of VCCircle.

Dr Reddy's Laboratories' shares last traded at Rs 3,545 each, up 1.6 per cent on BSE in a strong Mumbai market on Wednesday.

(Edited by Joby Puthuparampil Johnson)

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