Dr Reddy's Laboratories on Wednesday announced it would acquire Wockhardt's select divisions of branded generics business in India and a few other international territories of Nepal, Sri Lanka, Bhutan and Maldives for a consideration for Rs 1,850 crore.
The deal, say analysts, is well in line with the Dr Reddy's stated goal of growing its presence in the Indian market. It is expected to strengthen its acute therapeutic area (sudden onset ailments such as cough, cold and some types of pains etc). Although Wockhardt is selling what some analysts see as its crown jewels, the funds so raised will help the company strengthen its balance sheet and release resources to invest in its new drug discovery-related programme in antibiotics.
The business being acquired from Wockhardt comprises a portfolio of 62 brands in multiple therapy areas such as respiratory, neurology, VMS (Vitamins, Minerals & Supplements), dermatology, gastroenterology, pain and vaccines. Over the last couple of years, Dr Reddy's has focussed on growing the business in the Indian market. In the pecking order of top pharma firms, it has moved from 16th position to 14th, getting closer to 13th spot. The company officials hope to break into the top 10 in the near future.
Post the deal, the portfolio comprising 62 brands will be transferred to Dr. Reddy's along with related sales and marketing teams; and the manufacturing plant located in Baddi, Himachal Pradesh with all plant employees. The business undertaking is being transferred on a slump sale basis. "India is an important market for us and this acquisition will help in considerably scaling-up our domestic business. The acquired portfolio shall enhance Dr. Reddy'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 Dr. Reddy's," said G V Prasad, the Co-Chairman and Managing Director, Dr. Reddy's in a note.
The transaction is expected to close by the first quarter of the financial year 2020-21. Habil Khorakiwala, founder chairman of Wockhardt says the intended sale of business portfolio is in line with his company's strategic plan to shift from acute therapeutic areas to more chronic business-like anti-diabetes and CNS etc. and also to its niche antibiotic portfolio of NCEs. "The divestment will 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 break-through anti-Infectives (NCEs approved under coveted QIDP program of United States Food & Drug Administration) and R&D activities," he said.
The deal, according to Wockhardt, will enable adequate liquidity for robust growth in international operations and investments in Biosimilars for the US market; augment the remaining domestic branded business portfolio of the company and re-focus towards chronic segment with differentiated product portfolio; continue its ongoing research and development activities; be able to take necessary action for completion of clinical trials of the company's breakthrough NCEs in the anti-infective space, approved by coveted QIDP Program of United States Food & Drug Administration (US FDA); apart from strengthening the balance sheet.
After the sale of this business, Wockhardt will continue to own all its international operations in UK, USA, Ireland and other locations through its step down subsidiaries; the formulation plants located at Waluj, Shendra and Chikalthana in Aurangabad, Bhimpore and Kadaiya in Daman; bulk drugs plant at Ankleshwar and manufacturing facilities at all existing international locations apart from the research & development centres located at Chikalthana, Aurangabad, India and existing facilities in the international locations.