Strides to merge its Australian biz with Canadian drugmaker Apotex

The company likely to hold 50 per cent stake in the $700 million Australian generic market to create the country's largest generics drugmaker by volume and revenue

Indian pharmaceutical company Strides Shasun on Wednesday said that it would merge its Australian business with the local operations of Canadian drugmaker Apotex Inc to create the country’s largest generics drugmaker by volume and revenue.

Bengaluru-based Strides, which runs its business under the Arrow brand, will have a controlling stake in the merged entity. “Once complete, our merged operation will continue to provide all of the Arrow and Apotex brands that our customers have come to know and trust, and it further enhances our customer service and continuity of supply, to better help pharmacists grow their businesses,” said Dennis Bastas, executive chairman of Arrow.

The transaction will be earnings accretive for Strides Shasun from the first year itself, it said.

As such, the combined entity is expected to have a market share of 53-54 per cent (with nearly 3,200 first line pharmacy accounts) in the $1.1 billion Australian generics pharma market, making it the largest by volume and value. Other major players in the market are Mylan and Novartis’s Sandoz. 

The share-swap ratio of the deal, subject to regulatory approvals, will be announced on the closing. Apotex’s hospital business will not be part of the merger and will be retained by the parent.

The merged business will be led by Bastas as executive chairman, and Roger Millichamp of Apotex as chief executive officer.

“The proposed merger will take the best of both companies, optimise our shared cost base, and maintain the viability of our operations through more effective delivery of medicines and services to consumers and patients,” said Millichamp.

Australia accounts for nearly 35 per cent of Strides' total revenues; about 25 per cent comes from the US and the remaining from the emerging markets. It enjoys operating margins of around 18-20 per cent in Australia and now the combined Strides-Apotex entity would enjoy higher bargaining power in the market with large wholesalers.  

Analysts felt that Strides can achieve better margins by transferring its manufacturing operations to India.