Piramal Enterprises buys drug portfolio from UK firm for Rs1,160 crore

Livemint 31-January-2017

Mumbai: Piramal Enterprises Ltd (PEL) on Monday announced that it had bought a portfolio of drugs for spasticity, a muscle control disorder, and pain management from UK-based Mallinckrodt Llc for $171 million (around Rs1,160 crore) in an all-cash deal.

The acquisition, by the company’s UK subsidiary Piramal Critical Care, is a prelude to Piramal Enterprises’s plans to spin off and list its financial services unit and pharmaceuticals business, said chairman Ajay Piramal.

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“In the medium term we will do that. All our acquisitions, and in some ways moving up in value chains and getting more critical mass, are steps towards that,” Piramal said.

Earlier this month, in a second and more conclusive restructuring of its financial services business, Piramal Enterprises moved all assets and liabilities related to lending to real estate and non-real estate projects to its unit Piramal Finance Pvt. Ltd.

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In the pharmaceuticals space, the latest acquisition takes the number of Piramal buys over the last two years to seven, involving Rs3,000 crore of investment. In October, the firm, through Piramal Critical Care, acquired five anaesthesia and pain management drugs from Belgian drugmaker Janssen Pharmaceutica NV for $155 million in an all-cash deal.

“Size in terms of both top line and bottom line, in terms of management…” are critical ingredients to getting listed, Piramal said in an interview earlier this month. Whenever Piramal lists a unit, it wants to ensure that “it is of a critical size, it is relevant in the market, it is not small player”, he added.

“Any plan to create a distinct healthcare entity of the group would be welcomed by the markets as it leads to value unlocking and a focused organization for future growth, “ said Gautam Kothari, associate director at Equirus Capital Pvt.Ltd.

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The acquisition is being funded through a combination of internal accruals and debt, the company said.

The drug portfolio acquired from Mallinckrodt includes Gablofen, a severe spasticity management drug, and two other products which are under development. The deal also includes additional payment of $32 million depending on the financial performance of these drugs over the next three years.

While Gablofen is currently marketed in the US, the company said it has also got approval to launch the drug in eight European markets. For the 12 months ended September, the acquired portfolio had revenue of $44.6 million (Rs303 crore). In comparison, PEL’s health care division reported revenue of Rs1,725 crore for the half year ended September.

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“We are moving up the value chain by acquiring global businesses in niche capabilities and expanding manufacturing capacities in niche areas,” said Piramal. He added that the new products would boost PEL’s operating profits and margins besides helping to diversify its offerings in the US, which accounts for about 40% of the pharma division revenue.

The acquisition would help in strengthening its presence in the US, which currently contributes around 35-40% to the company’s overall pharma business.

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“This would also give us an opportunity to play in the European markets. We are present in Europe through anaesthesia products,” Piramal said, adding that the transaction would boost its presence in the global generic hospital drug market, which is worth over $20 billion in sales.

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