Cipla to acquire two US-based pharma cos for $550 million

Move in line with company's plans to expand its market share in the US

Drug maker Cipla today said it will acquire two US-based pharma companies, InvaGen Pharmaceuticals and Exelan Pharmaceuticals, for $550 million in an all-cash transaction.

The companies had combined sales of $225 million in the last twelve months to June 2015, Cipla said in a statement.

The deal, Cipla's most significant acquisition since the buyout of South Africa's Medpro two years ago, marks a delayed effort to build manufacturing presence in the United States, where most peers have already invested heavily.

Lupin, India's third-largest drugmaker by sales, in July agreed to buy US peer Gavis Pharmaceuticals LLC for $880 million in its largest ever deal.

"The portfolio being bought is largely oral products, so I don't think the margins will be huge, but at least they have something to get them going in the US," said Hemant Bakhru, analyst at investment bank UBS.

Most large Indian drugmakers are moving away from oral products to injectables and other complex generics that are more difficult to make and give higher margins.

But the US push was welcomed in the market, where Cipla shares rose as much as 4% after the announcement, against the broader Nifty that fell nearly 2%.

Cipla has a bigger focus on emerging markets than its peers. It made headlines in 2001 by making antiretroviral medicines to treat AIDS in Africa for under $1 per day and gets more than 80% of its revenue from markets including India and Brazil.

In recent months, it has sought to balance its geographical portfolio, and it said the US deal was part of that strategy.

The United States makes up only about 8% of Cipla's sales. 

As a result of Friday's deals, Cipla will get its first manufacturing plant in the United States, 32 products already on the market and 30 pipeline products set to be approved for sale over the next four years. UBS's Bakhru said he expected Cipla would be able to launch some of the drugs in the acquired portfolio by 2017 and 2018.

Barclays acted as financial advisor to Cipla on the deal. Jefferies advised InvaGen.

($1 = 66.4050 rupees)