Dr Reddy's Laboratories (DRL) has entered into a definitive agreement with Wockhardt to acquire select divisions of its branded generics business in India, Nepal, Sri Lanka, Bhutan and Maldives, and a manufacturing plant for Rs 1,850 crore.
The business is valued at 3.8 times the annualised revenue. As a part of the deal, a portfolio of 62 brands in multiple therapy areas such as respiratory, neurology, VMS, dermatology, gastroenterology, pain and vaccines would be transferred to DRL, along with related business assets and liabilities, contracts, permits, intellectual properties, employees, and marketing, sales and distribution of the same (in India, Nepal, Bhutan, Sri Lanka and Maldives).
Wockhardt's plant in Baddi, Himachal Pradesh is also being sold to DRL, together with entire manpower of the plant.
DRL sees the acquisition as a strategic move to boost its domestic business. “India is an important market for us, and this acquisition will help in considerably scaling-up our domestic business. The acquired portfolio shall enhance DRL’s presence in the high growth therapy areas with market leading brands such as Practin, Zedex, Bro-zedex, Tryptomer and Biovac. We believe the portfolio holds a lot of potential and will get an impetus under DRL,” said G V Prasad, co-chairman and managing director of DRL.
The drug maker expects to close the deal in the first quarter of financial year 2020-21. DRL last made India-centric product acquisition in 2015. It had acquired Belgian company UCB's select product portfolio business in India, besides Nepal, Sri Lanka and Maldives for Rs 800 crore.
Wockhardt expects the deal to help it focus on its niche antibiotics portfolio, and infuse liquidity in its existing business.
In FY19, this business contributed around Rs 594 crore, or around 28 per cent of the total standalone and 14 per cent of the consolidated revenue. For the nine-month period ended December 31, the business has contributed Rs 377 crore, or around 34 per cent of the standalone and 15 per cent of the consolidated revenue from operations, Wockhardt said.
“The intended sale of Business portfolio is in line with the company's strategic plan to shift from acute therapeutic areas to more chronic business like anti-diabetes, central nervous system (CNS) etc. and also to its niche antibiotic portfolio of new chemical entities (NCEs),” said Habil Khorakiwala, founder chairman and group chief executive officer, Wockhardt.
“The divestment will also ensure adequate liquidity to bring in robust growth in the chronic domestic branded business, international operations, investments in Biosimilars for the US market, apart from the company's Global clinical trials of breakthrough Anti-lnfectives and R&D activities,” Khorakiwala added.
Wockhardt would continue to own its entire international operations in the UK, US, Ireland and some other locations through its step down subsidiaries. It has formulation plans at multiple locations across India — Waluj, Shendra, Chikalthana in Aurangabad; Bhimpore and Kadaiya in Daman; bulk drugs plant at Ankleshwar — apart from international locations like Ireland.
In fact, 72 per cent of Wockhardt's consolidated revenue comes from international operations.
For Wockhardt, the deal brings in the much needed liquidity it needs to spruce up its existing business, especially the research and development for its novel antibiotic pipeline.