In its largest overseas pharma transaction, Aurobindo Pharmaceuticals has announced the acquisition of Sandoz’s generic business in the US for $900 million.
The deal gives the Hyderabad-based company access to Sandoz's portfolio of oral solids and dermatology drugs and makes it the second-largest generic player in the US based on prescriptions. Aurobindo will raise a $900 million bridge loan from Japanese lender MUFG to fund the purchase. The company had a net debt-equity ratio of 0.3:1, which will increase to 0.6 :1 after the transaction.
In 2015, Lupin had acquired US drug maker Gavis in a $880 million deal, making it the largest outbound deal for an Indian pharma company. The Aurobindo-Sandoz deal eclipses that. Sandoz is a generic division of Swiss pharma giant Novartis.
Aurobindo, which recently backed out of the race to acquire Mallinckrodt’s opioid business, was the sole Indian drug maker bidding for the Sandoz business.
Sandoz’s generic portfolio generated sales of $600 million in H1 2018 and is expected to generate sales of $900 million in one year of the completion of acquisition, the company said. The deal is expected to close next year and is subject to anti-trust approvals. The street cheered the deal and Aurobindo stock gained 9 per cent on the BSE to close at Rs 759.55 on Thursday.
"The acquisition will add approximately 300 products including projects in development as well as commercial and manufacturing capabilities in the US, complementing and expanding the group's portfolio and pipeline," Aurobindo said. Currently US business contributes to around 45 per cent of its revenue. As a part of the deal Aurobindo will get three manufacturing facilities in the US and about 750 employees from Sandoz would be transferred to it. Sandoz which is divesting its generic drug portfolio amid price erosion in the US will retain portfolio of biological drugs, injectables and complex products.
N Govindarajan, managing director of Aurobindo, said “The acquisition announced today is in line with our strategy to grow and diversify our business in the US. Acquiring these businesses from Sandoz will allow us to further expand our product offering and to become a leading player in the generic dermatology market. We expect a seamless integration of the acquired businesses with the rest of the Aurobindo group given the success we have achieved in our acquisitions to date.”
Aurobindo has been aggressive in growing its overseas business through product filings, diversification and acquisitions at low valuations. The Sandoz generic business is its third foreign acquisition in two years. In July Aurobindo purchased Apotex's international business in five European countries for 74 million Euros. Last year it acquired Portuguese drug maker Generis for 135 million Euros. Aurobindo's first major acquisition in the US was in 2014 when it acquired nutritional supplement maker Natrol which was facing insolvency proceedings. Aurobindo has since been able to turn around its fortunes.
Other big-ticket pharma deals
- 2015 Lupin buys US drug maker Gavis for $880 million
- Cipla acquires US drug maker InvaGen for $550 million
- 2017 Intas buys Teva's generic drug business in UK & Ireland for $764 million