Indian pharma firm acquires UK's Actavis to beat Brexit gloom

Beats Mylan, Novartis, Torrent, Aurobindo to the post. Promoter says hungry for more Almost inarguably, October 5th 2016, a Wednesday was the biggest day in the life of 53 year old Binish Hasmukh Chudgar, the highly low profile vice chairman of Ahmedabad based Intas Pharmaceuticals. That day in central London, Intas snapped up Israeli generic drug maker Teva's assets in UK and Ireland-Actavis UK Ltd and Actavis Ireland Ltd-in a record $ 764 million deal (Rs 5083 crore) out muscling bigger global rivals like Mylan and Novartis or domestic competition like Aurobindo pharma and Torrent Pharmaceuticals in a bidding process that lasted over 6 months. The deal is this year's largest outbound M&A transaction in India in the pharmaceutical space and clearly the biggest statement of intent Intas has made in its 40 year lifespan. Yet, true to his nature, Binish -the eldest of the three scions to patriarch Hasmukh Chudgar-was not raising a toast at Mayfair or throwing a success party. Instead he was at a trade conference in Barcelona shunning the spotlight even when he knew it would be impossible for him or his company to remain this low key henceforth.

Consider the facts. This acquisition expands Intas's UK manufacturing presence adding the Barnstaple site in North Devon and more than doubling Intas's pan-European operations that has revenues exceeding $500 million. The Barnstaple plant will become the company's fourth UK site. Already Intas is the largest privately held pharmaceutical companies in India and figures in the top 10 biggest pharma firms in the country. Its annual turnover is in excess of $ 1 billion-60 per cent of which comes from international markets. Chudgar says one of the key reasons for the acquisition is that it will make Intas among the top 2 players in the UK and Ireland markets. “This transaction represents a unique opportunity for Intas to build scale in the UK and Ireland-adding to our market-leading hospital franchise-and creates a strong platform for further European expansion,” he says. “We have a clear plan for the continuation and development of the Barnstaple site and the Actavis UK and Ireland teams. It takes time to reach this position and we would like to be No.1 or 2 in certain markets. With this deal, we will be becoming the No.1 or 2 in UK and Ireland.” The opportunity for Teva's assets itself opened up as part of the European Commission's (EC) anti-trust divestiture requirements arising from Israel company's acquisition of Actavis Generics. Teva agreed to purchase Allergan's generics unit for $40.5 billion in cash and stock in July 2015. The deal made Teva the largest manufacturer of generic drugs in the world but since then it has been on a divestment spree to address antitrust concerns. Other Indian firms have also snapped up some of the assets in the past. In July, India's fifth largest drug maker Cipla acquired a portfolio of three products from Teva in the US. Aurobindo Pharma Ltd was also part of the 11 firms that agreed to acquire 79 existing and future drugs from Teva. Further, in June Dr. Reddy's Laboratories Ltd and Cadila Healthcare Ltd (Zydus Cadila) had announced they will buy products divested by Teva in the US. Yet, Intas' acquisition is in a different league altogether and is second only to Lupin's acquisition of New Jersey-based Gavis Pharmaceuticals Llc and its affiliate Novel Laboratories Inc. for $880 million (around Rs 5,600 crore) last year. While most companies from emerging markets are busy scouting for potential buy outs in US, world's most lucrative pharma market, Intas' move for a UK based firm does go against the flow. “UK is a large generic market-- one of the top two in Europe-with a strong potential for growth but is highly competitive,” says Sujay Shetty, leader (pharma life sciences) PWC India. “For anybody looking to increase its market share in the UK, it makes sense to go for brands that are already well entrenched in the market. It is not that easy to break-in on your own.” The company itself is far from done yet and looks hungry for more. Chudgar says the firm's balance sheet is so strong it can raise another $ 1 billion and yet be debt free in four years thanks to the cash being generated year on year. “Our net-worth-to-debt is around 1x, we can go to around 3x to 4x, so it is not an issue at all,” he says. “The balance sheet is strong enough for us to borrow around another $1 billion. We are generating a lot of cash, so in another three to four years, the way we are working, we will be debt-free. We are evaluating more opportunities in US and Europe besides this.” Watch this space.