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Mylan to buy Strides Arcolab’s injectables unit Agila for $1.6B

28 February, 2013

Mylan Inc has struck a deal to acquire Agila Specialties Pvt Ltd, a developer, manufacturer and marketer of generic injectable products, from Strides Arcolab Ltd for $1.6 billion (Rs 8,600 crore) in cash. Earlier, Pfizer was the frontrunner for snapping up the unit which was on the block for a while. Strides was looking to sell its specialty business Agila and was courted by various suitors including a few strategic acquirers and private equity firms.

This will be the third largest M&A deal in the pharmaceutical sector in India, behind Daiichi Sankyo’s acquisition of majority stake in Ranbaxy and Abbott Laboratories’ purchase of the domestic formulations business of Piramal Healthcare.

VCCircle had earlier reported that the deal could be valued at around $1.7 billion.

The agreement also provides for up to an additional $250 million in potential payments, subject to the satisfaction of certain conditions by Strides. Mylan is not assuming any outstanding debt or acquiring the business’s cash as part of the transaction.

The sale transaction does not include Agila Biotech and the pharma & biotech business will be the future growth areas for Strides, according to the company. The firm will use the cash from the unit sale to retire debt besides pre-tax distribution of approximately $700 million-$800 million to shareholders. The firm did not elaborate it, but it is expected to be done through special dividend.

Mylan has obtained a commitment letter from Morgan Stanley for a new $1 billion senior unsecured bridge term loan in connection with the planned acquisition.

Agila clocked Rs 1,365 crore in revenues with EBITDA of Rs 459 crore. The deal values the unit at 18.7x its trailing EBITDA.

Strides Arcolab scrip crashed 5.8 per cent in early trades to Rs 927.5 a share on the BSE in a strong Mumbai market. The firm currently has a market cap of $1 billion, much lower than the cash infusion from Agila sale.

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 acquisition is expected to be immediately accretive to Mylan’s adjusted diluted earnings per share following closing.

The transaction is expected to close in the fourth quarter of 2013, subject to regulatory approvals and certain closing conditions.

Mylan had earlier acquired Matrix Laboratories in India.

Commenting on the deal, Mylan CEO Heather Bresch said, “The addition of Agila to our existing injectables platform will immediately create a new, powerful global leader in this fast-growing, attractive market segment and accelerate our target of becoming a top-three global player in injectables. Our significantly expanded manufacturing capacity will allow us to vertically integrate our injectables platform and fast track our ability to pursue additional product opportunities and partnerships to facilitate long-term growth.”

Mylan president Rajiv Malik added, “By combining Agila’s strong injectables capabilities with Mylan’s powerful global engine, we will catapult our injectables business to a new level. Agila will bring Mylan one of the deepest and broadest global injectables portfolios in the industry and together, we will have more than 700 marketed injectables products and a global pipeline of more than 350 injectables products pending approval. In addition, Agila will further expand Mylan’s geographic footprint, providing us with entry into key growth markets such as Brazil, and position us to leverage our global portfolio in these exciting markets, in line with our mission of providing the world’s 7 billion people access to high quality medicine.”

Mylan CFO John Sheehan said, “This is a financially and strategically compelling transaction, which is consistent with Mylan’s stated acquisition strategy and financial commitments. We anticipate that the acquisition will immediately enhance our revenue and earnings growth upon closing, and nearly double our business from injectables in the first full year. Further, this transaction will significantly accelerate achievement of our $1 billion target for our institutional business.”

Commenting on the transaction, Arun Kumar, executive vice-chairman and Group CEO of Strides Arcolab 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.”

Headquartered in Bangalore, 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 (ANDAs) approved by the US Food and Drug Administration (FDA). Agila has a global pipeline of approximately 350 filings pending approval, including 122 ANDAs pending FDA approval. The company currently develops products across nine high-quality manufacturing facilities in India, Brazil and Poland, eight of which have been approved by the FDA. Agila’s manufacturing capabilities include vials, pre-filled syringes, ampoules, lyophilisation, cytotoxics and antibiotics.

Its manufacturing base represents one of the largest steriles capacities in India and one of the largest lyophilisation capacities in the world. In addition to its established presence in developed markets, Agila has a strong position in high-growth emerging markets, including Brazil.

Agila’s capabilities complement Mylan’s existing injectables platform of more than 500 products marketed globally, including 55 ANDAs, and its high quality sterile manufacturing facilities in Ireland and India.

The global generic injectables market is expected to grow at a compound annual growth rate of 13 per cent from 2011-2017, driven by patent expiries, outpacing most other dosage forms. The combined Mylan-Agila portfolio will represent approximately 70 per cent of the regulated market demand for injectables and the combined R&D platform and manufacturing capabilities will position Mylan to be a significant participant in advanced new technologies to drive future growth.

Morgan Stanley is the financial advisor to Mylan, and Skadden, Arps, Slate, Meagher & Flom LLP is acting as overall legal advisor, assisted by Slaughter and May and Platinum Partners.

Jefferies International Ltd was the sole financial advisor to Strides on the transaction.

(Edited by Sanghamitra Mandal)


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Mylan to buy Strides Arcolab’s injectables unit Agila for $1.6B

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