Piramal Enterprises seeks more speciality play

Firm's 2nd buyout in pain management space in 3 months

Piramal Enterprises on Monday bought a portfolio of pain management drugs from UK-based Mallinckrodt for $171 million (Rs 1,162 crore) in an all-cash deal. 
 

Piramal Enterprises will pay another $32 million over three years based on the performance of the drug portfolio.

This is Piramal Enterprises’ second acquisition in the last three months and the seventh in the last two years. “Our strategy is to move up the value chain,” said Ajay Piramal, chairman, Piramal Enterprises. 

“These products are difficult to manufacture. It is a niche market. These are not normal generic products where you have a lot of competition,” he said.
 

Gablofen, a limited competition drug sold in the US and approved for sale in eight European countries, generated sales of $44.6 million for Mallinckrodt in the trailing twelve months till September. Gablofen is the only drug in the category available in pre-filled syringes and vials and Piramal said it would deliver high operating margins.  It also fits in the Piramal Enterprises’ strategy to expand in the hospital and critical care segment. This is the company's second acquisition in pain management drugs in three months. 

Piramal Enterprises is trying to reinvent itself after selling its domestic formulations business to Abbott in 2010 for $3.72 billion. The US contributes 35-40 per cent of Piramal Enterprises’ revenue. But unlike other Indian pharmaceutical companies that market generic drugs,  Piramal Enterprises derives its revenue in the US from contract manufacturing and sale of anaesthesia and pain management drugs.

According to Morgan Stanley, $80 billion in branded drug sales will lose patent protection globally over the next five years. It has also identified additional generic drug opportunities from $23 billion branded sales of complex products with limited patent protection. 

In December, Sun Pharmaceuticals acquired skin cancer drug Odomzo from Novartis for $175 million, its first branded oncology drug in the US. In the same month, Glenmark announced a 10-year strategic blueprint that will see the company develop new dosage forms and increase sales by in-licensing complex drugs.
 

The pharmaceuticals business of Piramal Enterprises contributed Rs 3,558 crore, or half its total revenue, in 2015-16. The company plans to demerge its healthcare and financial services business. 

On FDA inspections: 

Our units have had 24 FDA inspections and we’ve 480 others and till now, there has not been a single day lost because of quality problems

On changes in business environment in US:

We’ve manufacturing around the world. We’ve a workforce which is pretty mixed and most are US-based and US citizens and it is not that we will have to move people from India. The issues with H1B visas and all these are not critical for us. Our belief is that whatever is happening in the US is not going to make impact on our business

On demerger:

We want to ultimately look at Piramal Enterprises as a separate biz for financial services and for pharmaceuticals. In the medium term, we will do it and all these buyouts and in some way moving up the value chain are steps towards that 

On rate cut expectation:

Lot of funds available are available with the bank. They need to lend them out. That is one of the reason why I hope RBI will do it