Dishman Pharma acquires French firm, shares close flat.

Dishman Pharmaceuticals & Chemicals (DPCL) has announced that it has acquired a France based pharmaceutical contract manufacturer Creapharm Parenterals through its 100 per cent owned subsidiary Carbogen Amcis AG. Creapharm Parenterals has also been renamed as Carbogen Amcis SAS. Company has not disclosed any financial details of this deal. Shares of DPCL rose to day’s high to 49.65 in the morning, but closed 0.21 per cent down on 47.40 by the end of the day.

Creapharm Parenterals founded in 1990 and is in the contract manufacturing business of clinical trials products, more specifically in the business of capsule manufacturing, packaging and logistics of clinical trial drugs. According to information on the website of Carbogen Amcis, Creapharm Parenterals has 16 specialist employees operating its manufacturing site in Riom, France. This acquisition will help DPCL to add services like formulation, lyophilization for the fast supply of drugs in the preclinical and clinical trials.

According the news articles, DPCL has paid negligible amount for the acquisition. Financial details of the acquisition are not available at this moment. To find out the performance of the Creapharm parental, we went ahead and sourced the financial information from a French website Bilansgratuits.Fr which has captured its financial history for last three years. As per the information available on the website, financial performance of Creapharm Parenterals has not been satisfactory. Company had revenues of 1.6 million Euros (About 10-11 crore) in 2010. Though it currently does not have any debt on the balance sheet it has consistently made losses for all the three years i.e. from 2008-2010. Over the same period its EBITDA margins have declined, sales is down by nearly 11 per cent and input costs have increased by 4 per cent which has impacted its profitability.

Carbogen Amcis AG, a subsidiary of DPCL contributed about 36 per cent in DPCL’s top line however on the bottom line it made a loss of Rs 6 lakh. It has a total loan of Rs 190 crore. Company has restructured the operations in this subsidiary and expects to achieve the break even by the end of this fiscal. With the acquisition, profitability of Carbogen Amcis AG will further come under stress.

DPCL has a total market cap of Rs 383 crore and has posted 22 per cent rise in its top line for the half year ended September 2011. Currently its total debt stands at Rs 970 crore compared to Rs 818 crore in September 2010. Its interest expenses rose by 62 per cent to Rs 28 crore in H1FY12. EBITDA margins have also declined sharply from 25 per cent to 15 per cent during the same period. Though top line is showing healthy growth, net profit has declined from 55 crore in the H1FY11 to Rs 8 crore in due to the interest cost as well.

The acquisition of Creapharm Parenterals would merely add about 10-12 crore in the top line, which is about 1 per cent of the total revenues. On the bottom line we are not very optimistic given the performance of the Creapharm Parenterals in last three years. In our opinion this acquisition quite long way to go in order to make any significant value addition to DPCL.