Torrent in talks to acquire select Novartis businesses

Ahmedabad-based Torrent Pharma is in talks to acquire select businesses from Novartis India in a deal estimated to be less than Rs 500 crore.

Torrent’s plan for acquisition comes at a time when its sales in the US market have declined by 51 per cent in the nine months ended December.

Novartis has drugs in pain management and diabetes care that it considers core. It also has drugs to cure tuberculosis and other infectious diseases.

“The discussions between Torrent and Novartis are expected to be finalised in a month,” said an investment banker familiar with the discussions. “The deal should be valued at less than Rs 500 crore,” he added.

Novartis India did not respond to an email query sent to it for comments. Torrent Pharma could not be reached for comments.  

“As multinational pharmaceutical companies choose to focus on speciality drugs, they are divesting what they think are non-core products,” said a person familiar with the discussions that Torrent is having with Novartis.

“Acquiring select brands is a continuous process for Torrent,” the person added.

Torrent has a strong presence in dermatology after acquiring the Indore manufacturing facility of Zyg Pharma, an Encore group company, along with some of formulations in May 2015.  

Torrent acquired the domestic branded formulations business of Elder Pharma for Rs 2,004 crore three years ago, which helped the company expand its market share in women’s healthcare, nutraceuticals and pain management.  

It also acquired the generic anti-bacterial minocycline tablets after the US Federal Trade Commission ordered Sun Pharma to divest the brand as part of a conditional approval for its $4 billion merger with Ranbaxy.

Novartis globally has been selling businesses it considers non-core. Last year, it sold 14 established prescription brands in Japan to Sun Pharma for Rs 1,900 crore.

For Torrent, small brand acquisitions are likely to play a key role.

It can help overcome concerns by the US drug regulator and plugging gaps in therapeutic segments will help Torrent maintain its dominance in the market.

The US business accounts for nearly 40 per cent of Torrent’s turnover. The company’s consolidated revenue declined by 15 per cent in April-December dragged down by US revenues, which fell by 51 per cent on account of slowing sales of generic Abilify. Torrent’s net profit halved to Rs 728 crore over the period.

“Torrent has a profitable Brazil business and it has presence in regulated markets like Germany. It is important to be geographically diversified in the branded generics space, which reduces risks of dependence on a single market,” said an analyst tracking the company.

The Torrent stock has corrected 25 per cent in the last six months. Analysts expect sales growth in India is likely to make up for the slow growth in the US.

Buying spree

Recent acquisitions by Torrent Pharma

• Dec 2013: Acquired branded domestic formulations business of Elder Pharma for ~2,004 crore
• Feb 2015: US Federal Trade Commission ordered Sun Pharma to divest its interest in a generic anti-bacterial medicine to Torrent Pharma for an undisclosed sum 
• May 2015: Acquired Encore Group company Zyg Pharma for an undisclosed sum
• Jun 2016: Signed agreement to acquire Vizag-based API manufacturing unit of Glochem Industries for an undisclosed amount