Recipharm AB, a Swedish company, active as a pharmaceutical contract development and manufacturing organisation (CDMO), has agreed to acquire Kemwell’s pharmaceutical contract development and manufacturing businesses in India, US and Sweden in a strategic deal worth $ 205 million (about Rs 1360 crore).
Anurag Bagaria, managing director of Kemwell, commented, “I am delighted about the combination of Kemwell’s pharmaceutical business with Recipharm, both of which have many complementary capabilities. I am confident that together we will be even more successful and we look forward to building on our combined strengths.”
Recipharm and Kemwell have signed two separate agreements for this. The first acquisition, comprising US and Swedish operations, is expected to close during the second quarter 2016, after review by the Swedish Competition Authority, while the second, comprising operations in India, is conditional on governmental approvals and expected to close before year end. While the acquisition price for Kemwell’s operations in the US and Sweden amounts to approximately $ 85 million, while Indian operations amounts to $ 120 million.
The combined entity will have a significantly enhanced reach and scale. The businesses to be acquired had 2015 preliminary net sales of approximately SEK 745 million, corresponding to 22 per cent of Recipharm’s 2015 total net sales. The acquisitions are expected to be accretive to EBITDA margin already from 2016 and are well in line with Recipharm’s overall financial objectives.
US operational presence with strong development capabilities, enhanced technology base and broad customer portfolio, provides Recipharm with improved access to the world’s largest pharma market. It also expands Swedish firm position in emerging markets significantly, taking sales in these markets to more than SEK 800 million, dominated by sales directly to the fast-growing pharma market in India.
Thomas Eldered, CEO of Recipharm AB, said, “These transactions represent a significant step in both the consolidation of the CDMO industry and the transformation of Recipharm into a global leader. We now have a US footprint which we can use to further penetrate the world’s largest pharmaceutical market and the business in Sweden provides us with several opportunities for synergies. When we receive the approval in India, Recipharm’s customers will have access to very cost effective development and manufacturing capabilities able to serve international markets including the US.”
Acquisition of Kemwell expands Recipharm’s capabilities in India as it provides access to significant cost effective development operation working with customers with strong US ANDA5 project pipeline; adds US FDA and EU approved cost effective manufacturing options; and expands manufacturing capabilities, complementary technology to Nitin Lifesciences - the sterile injectables maker in which Recipharm acquired 74 percent stake in October last year.
The deal further strengthens Recipharm’s synergistic business model by aligning US and Indian development and technology operations with the combined company’s manufacturing capabilities in India and Europe. In addition, there are potential commercial synergies from enhanced customer offering and cross selling.