Cipla to acquire generic businesses in the US for USD 550 million

The UK arm of Cipla India recently planned to acquire two US-based companies, InvaGen Pharmaceuticals Inc., and Exelan Pharmaceuticals Inc. This transaction is valued at USD 550 million and it will be an all cash transaction. This investment is in line with Cipla’s strategy to grow Cipla’s share in the US pharmaceuticals market.

This acquisition is the second landmark acquisition in Cipla’s 80 years of history, and will give the company a chance to scale in the US generics market through a wide ranging product portfolio in central nervous system (CNS), cardiovascular system (CVS), anti-infectives, diabetes as well as other value added generics.

InvaGen offers a large capacity manufacturing base in Hauppauge, New York. The acquisition of InvaGen pharmaceuticals also provides Cipla with about 40 approved abbreviated new drug applications (ANDAs), 32 marketed products, and 30 pipeline products which are expected to be approved over the next four years. Interestingly, InvaGen has filed five first-to-file products which represent a market size around USD 8 billion in revenue by 2018. Dosage forms include immediate release, modified release and extended release tablets and capsules. InvaGen has three units located in Long Island, NY, with a total production capacity of 12 billion tablets and capsules per annum and about 500 employees.

This acquisition further provides Cipla with an access to large wholesalers or retailers in the US. The acquisition of Exelan Pharmaceuticals provides Cipla access to the government and institutional market in the US through Exelan’s deep expertise, engagement and experienced management team in the business.

This investment is in line with Cipla’s strategy to grow Cipla’s share in the US pharmaceutical market. The Company views InvaGen as a strong strategic fit with a relevant diverse portfolio as well as a strong market and customer presence. With a local manufacturing facility, Cipla can further strengthen its presence in the country

.Cipla is among the first drug manufacturers in India, but India Ratings & Research of Cipla's shows that the ratings could be affected because of this cash-rich acquisitions. The acquisitions is slated to be funded by a mix of internal accruals, existing cash balances and debt.

The combined revenue from these transactions is more than USD 225 million in the 12 months to June. Cipla posted Rs 10,131.78 crore revenue in its FY15 annual result which rose by 8 per cent y-o-y.

Today, Cipla is trading at Rs 659, around 1 per cent higher