Cipla completes $550 million acquisition of 2 US generic drug companies

The acquisition of InvaGen and Exelan will boost Cipla's US business which currently accounts for 8% of its revenue

Cipla has compled its $ 550-million (around Rs 3575 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 2,700-crore deal to buy South African drug firm Medpro in 2013.

While Lupin and Sun Pharmaceuticals earn 40-50 per cent of their revenues from the US, Cipla's share from the geography is much smaller. The US accounts for eight per cent of Cipla's revenue and the company aims to increase the share to 20 per cent 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 the 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. 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 the US Food and Drug Administration scanner last year for not following current good manufacturing practices. The plant received Form 483, which is issued for violations and such regulatory action could lead to delays in product approvals from the plant. But, a Cipla spokesperson said ‘’as part of the routine course of business, pharmaceutical companies receive observations from regulators ranging from minor to major issues…..’’ He added, ‘’this is part of our business, our factories are running in a state of control, we manufacture, test, release, and distribute safe and effective product.’’  

Analysts also point out that InvaGen does not have a 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.’’ To that, the company said, ‘’InvaGen has a rich pipeline of under-registration and under-development products spanning across niche and high value segments. This year, we will witness approvals of approximately 15 products. InvaGen has also filed 5 first-to-file products which is expected to bring tremendous value in the coming 5-6 years.’’