Pharma major Lupin has divested its entire stake in its Japanese subsidiary, Kyowa Pharmaceutical Industry Co Ltd, to private equity firm Unison for an enterprise value of Japanese 57,361 million yen (Rs 3,702.4 crore). With this deal, Lupin has exited the generic pharmaceuticals business in Japan. However, it will continue to pursue opportunities in biosimialars and the complex generic space in that country through partnerships.
Lupin claimed it made four-and-a half times its initial investments in Japan through this deal and that it enjoyed the 'golden age of generics' in that country.
Lupin's subsidiary Nanomi B V, which holds a 99.82 per cent stake in Kyowa, is selling its entire stake to Unison's entity Plutus Ltd. The divested business had recorded a revenue of 14,241 million yen in the first half of FY20 (and 28,335 million yen in FY19). The transaction will generate a post-tax net cash inflow of approximately 32,596 million yen (Rs 2,103.9 crore). The company said this would reduce its net debt from Rs 4,361.8 crore as of September 2019 to Rs 1,129 crore and the net-debt-to equity ratio would improve to 0.08 (compared with 0.32 as of September). The sale was part of a competitive bidding process.
With a strengthened balance sheet, Lupin said it would be open to inorganic growth opportunities, especially in India. The company was also exploring opportunities in China, it said.
Lupin's chief executive officer Vinita Gupta said: "This transaction is aligned with our vision to focus on our key markets and strategic priorities to achieve sustainable growth in the medium to long term. The deal proceeds will be utilised to strengthen Lupin’s balance sheet as well as provide growth capital to support organic and inorganic initiatives for our focus markets." Lupin is thus exiting the generic and oral solid business in Japan, but remains committed to complex generics and biosimilars portfolio globally, including leveraging a portfolio in Japan in partnership with Unison as well as others
Unison Capital, founded in 1998, is an independent private equity firm with operations in Japan, Korea and Singapore. It is a leading PE player in Japan with investments in the healthcare and pharmaceuticals sector.
Lupin believes that the way to grow in Japan is through a differentiated play. The annual price cuts made the Japanese generics market unattractive. Lupin had started to build a specialty portfolio in Japan, but, as the company's managing director Nilesh Gupta said: "I don't think we achieved our goals on the specialty brands. We announced a co-marketing last year, which actually helped grow that business, but it is not material."
Lupin will now evaluate its specialty portfolio and see if it can forge marketing tie-ups with companies in Japan for some of these products. The company recently launched biosimilar etanercept (for treating psoriasis) in tie-up with Japan's Nichi-Iko.