Published on : Nov 06, 2017
The pharmaceutical sector in India is seemingly going through exciting times in emerging markets, especially powered by several forces of consolidation. On October 3, 2017, Torrent Pharmaceuticals Limited, an India-based prominent drug maker inks a definitive agreement with Unichem Laboratories Ltd. to acquire the latter’s branded drug business, comprising that of India and Nepal, for a consideration of Rs 3,600 crore. According to a filing by the pharma company, the acquisition will include a vast portfolio spanning 120 products and notably manufacturing facility at Sikkim, as well as the employees working in it.
Current Valuation of Acquiring Branded Formulation Business Justified
The deal expected to be funded by bank borrowings and earnings by the internal accruals of its business and marks the fifth one its acquisition spree beginning few years back. Of note are its acquisition of branded formulations of Elder Pharma in 2014 as well as acquiring manufacturing plants of Glochem industries and ZygPharma, all India-based pharmaceutical firms.
The deal bodes marked significance in the times of an uncertain business weather in India, notably spearheaded by regulatory concerns of the GST implementation. Earlier acquisition of Elder’s branded formulation business by Torrent was valued at around Rs 2,004 crore or 4.8 times of the sales. Of note, the branded formulation business of Unichem generated a topline of approximately Rs 992 crore, which makes the current valuation justified, according to several market experts.
Deal to Catapult Torrent to Unique Leadership Position
Torrent expects the deal to considerably consolidate its position in the India pharmaceutical market, supported by a variety of factors. The Ahmedabad-based pharmaceutical firm hopes to ramp up its share in the Indian business from 34 percent to 42 percent boosting medium term profitability, since a major part of its therapies are focused on chronic diseases. Furthermore, the deal will also have a strong bearing on the leadership position. Notably, the acquisition will help Torrent rise to 5th position from the current of 13, with regard to its seven key specialties, with a major boost to its branded business in cardiology, gastro and central nervous system.
Furthermore, with a robust portfolio of branded formulations Unichem boasts of, the deal will notably add one branded valuation amounting to Rs 200 crore and three of over than Rs 50 crore each. This will unlock new revenue streams in the therapies and sub-therapies across all specialties in the global pharmaceutical market.