Cipla's Africa network gets a booster dose

Adcock Ingram to acquire Cipla Medpro, with which Cipla has a 20-year supply agreement.

Cipla’s exports to Africa, its biggest export market, may get a boost after South African drug maker Adcock Ingram Healthcare revealed plans to acquire Cipla Medpro.

Cipla has no equity in Cipla Medpro, which is one of South Africa’s top 10 pharma firms and has a $100 mn turnover, but has a 20-year supply agreement with it.

Cipla gets about 34 per cent of its Rs 4,429 crore turnover from Africa, mainly from sales of cheap generic HIV/AIDS drugs. Supplies to Medpro contribute almost half the revenues.

Johannesburg-based Adcock, the largest over the counter drug maker in South Africa, today said it plans to acquire Cipla Medpro for close to $233 million, or Rand 2.13 billion. After the acquisition, Adcock is expected to control a quarter of the South African market.

“The merger will be a win-win situation for Cipla and us, as the combined Adcock-Cipla Medpro will have a generic drug market share of over 25 per cent in South Africa,’’ Adcock CEO Jonathan Louw told Business Standard in a telephonic conversation from South Africa. “Besides, we can also leverage Cipla’s research and development and manufacturing capabilities.”

Adcock has already initiated discussions with the Indian Cipla on the future scope of existing marketing alliance, Louw said.

“This development will not impact us, since we have our own supply arrangements in South Africa and other African countries. If Adcock Ingram is ready to continue with the existing arrangement, we will continue the supplies,” Amar Lulla, joint managing director of Cipla said. He, however, declined to reveal the size of revenues from Cipla Medpro.

Cipla Medpro is strong in the prescription market, while Adcock leads in the over-the-counter (OTC) and hospital products markets. Adcock Ingram has a partnership with Bangalore-based Medreich for the past seven years. It formed a manufacturing joint venture in Bangalore 18 months earlier, to manufacture OTC products for the South African and African region.

“This partnership will not be impacted by this transaction,” said Jonathan Louw.