Cipla completes $550 million acquisition of US cos InvaGen, Exelan

Transaction gives the drug maker a bigger presence in the lucrative US market

Cipla has completed its $550 million (around Rs 3,575 crore) acquisition of US generic drug makers InvaGen and Exelan. This gives the 80-year-old Indian drug maker a bigger presence in the lucrative US market. This is its second major acquisition after the Rs 2700-crore deal to buy South African drug firm Medpro in 2013.

While Lupin and Sun Pharmaceuticals earn 40-50% of their revenue from the US, Cipla's share from the geography is much smaller. The US accounts for 8% of Cipla's revenue and the company aims to increase the share to 20% over the next few years.

The deal which was announced last September will give Cipla access to InvaGen's manufacturing facilities and research and development capabilities. The combined revenue of InvaGen and Exelan was $ 230 million in 2015.

The deal will also provide Cipla with 40 approved abbreviated new drug applications, 32 marketed products and pipeline of 30 products which are expected to be approved over next four years.

InvaGen has filed five first to file products giving the company first mover advantage. The deal will enable the company to grow its front-end presence in the US and increase sales of its own-branded products and through Exelan it gives access to US government business.

Umang Vohra, global chief operating officer, Cipla said "The acquisition will further strengthen Cipla's presence in the US pharmaceutical market. InvaGen's balanced portfolio, robust manufacturing base and strong R&D capabilities will act as lever to expand Cipla's reach in the US market."

While Cipla is bullish about growing its US business, analysts caution of challenges. InvaGen's plant in New Jersey came under US Food and Drugs Administration scanner last year for not following current good manufacturing practices. The plant received Form 483 which is typically issued for violations and such regulatory action could lead to delays in product approvals from the plant. Also analysts point out that InvaGen does not have portfolio of specialty drugs.

In their note to investors in September Nomura analysts Saion Mukherjee and Ayan Deb wrote "Cipla acquires a portfolio of largely plain vanilla oral solids where its capabilities are already well established, and hence the acquisition adds little to Cipla's capabilities. It does not get an established front end. Also significant slowdown in product approval from InvaGen is an area of concern. The company has not received any approvals in the past year."