Bangalore-based Strides Arcolab is looking for buyers for its business in the Japanese market. According to sources, Strides has given a mandate to Daiwa Capital to scout for buyers from the East Asian nation. The Rs 1,700-crore Strides had earlier appointed US-based Jefferies to identify buyers from all other global markets, except Japan.
Although Strides has plans to sell its pharma and branded generic business that fetches it a revenue of Rs 1,075 crore, the company will retain its other business — injectables. It is a Rs 690-crore business. The reason behind the company’s decision to retain injectables includes its pacts with leading players like Pfizer. In early 2010, Strides entered into a licensing and supply agreement with Pfizer for a portfolio of 40 off-patent sterile injectables and oral products.
“We do not want to comment on market speculations,” said Arun Kumar, Executive Vice-Chairman & Group CEO. When contacted, Brijesh Koshal, managing director, investment banking, at Daiwa Capital Markets India, refused to comment.
The company has a market cap of Rs 2,212 crore as per yesterday’s closing price on Bombay Stock Exchange. The promoter holding in the company was 28.43 per cent by September 30.
The company had reduced its debt equity ration to 1.57 in FY 2010 from 4.63 in FY 2007.
The company has sales of Rs 780 crore from the branded generics business. Out of the branded generic sales, Australia-subsidiary Ascent Pharmahealth contributes a revenue of Rs 583 crore, African business contributes about Rs 137 crore and India has a sales of Rs 60 crore. Strides has manufacturing facilities for branded generic drugs each in Singapore, Lagos, Milan and three in India.
According to Sujay Shetty, Executive Director (Pharma Life Sciences) at PricewaterhouseCoopers, Japanese players are very keen on Indian market since the government started pushing for more generic sales.
He said, “The Japanese Government is trying hard to increase generic sales in Japan and reduce its healthcare expenditure burden.”
The government-funded National Health Insurance scheme covers Japanese citizens. The government, which wanted to reduce the burden, is looking to expand generic drug penetration to 30 per cent of the overall market by 2012.
The $75-billion Japanese drug market has a small generic segment, worth 5 per cent of the total in value terms and 19 per cent in volume terms.
“Also,” adds Shetty, “another opportunity that awaits Japanese players is that of launching their own product in Indian market as well as those markets where the target companies have their presence.”
Last year, Strides rebranded its injectable business as Agila and it had signed an agreement with BioChimico of Brazil to set up a joint venture company for the Brazilian hospital market.