Piramal acquires five brands for Rs 1,164 crore

Ajay Piramal-led Piramal Enterprises (PEL) has acquired five injectable anaesthesia brands from Belgian drugmaker Janssen Pharmaceutica in a deal valued up to $175 million (Rs 1,164 crore), including an upfront payment of $155 million. This would be the sixth acquisition by the pharmaceutical wing of the company in the past two years. This is seen as an effort by the firm to

reinvent itself after selling off domestic formulation business to Abbott in 2010 for $3.72 billion (Rs 17,500 crore at exchange rates then). It will help the company tap the $20-billion global generic injectable hospital drug market. Globally, PEL has a 12 per cent market share. It is ranked third in the $1.1-billion inhaler anaesthesia segment, but has limited presence in the much larger injectable anaesthesia segment. The company already sells inhalation anaesthesia in about 100 countries and the deal gives the company an opportunity to expand its product offerings.

“Health care is an important focus area for PEL and we are strongly committed to growing this segment,” said Ajay Piramal, chairman of the company, who has often been criticised for exiting the core of domestic formulation. The company’s health care business spread across three business-lines reported Rs 3,558 crore revenue at the end of the last financial year, recording a compounded annual growth rate of 17 per cent for the past five years.

Piramal’s health care business contributed about half to the group’s turnover of Rs 6,610 crore in the last financial year. The health care business comprises three segments – contract manufacturing, critical care and consumer health business. The revenue for the critical care business for the period was Rs 876 crore, which includes anaesthesia products. Contract manufacturing and over-the-counter products had revenue of Rs 2,290 crore and Rs 393 crore, respectively.

Piramal acquires five brands for Rs 1,164 crore “This acquisition is critical in shaping our product offerings, providing access to global markets and leveraging our existing capabilities,” said the chairman. The acquired products had annual sales of $45 million and the deal size is valued at 3.8 times the sales and 10 times their earnings before interest, taxes, depreciation and amortisation.

As part of the transaction, the company will pay Janssen $155 million upfront to acquire brand names and intellectual property associated with the five products along with the know-how for their manufacture. The deal does not involve transfer of manufacturing facilities or employees. Janssen will sell the products on behalf of PEL until the transfer of marketing approvals and can earn an additional $20 million on completion of certain financial milestones. Rothschild is the financial advisor to the transaction that is expected to close this week.

“We’re ready for all sorts of acquisitions — big or small,” said Nandini Piramal, executive director at the company overseeing the growth of pharmaceutical business. The company had Rs 15,000 crore of cash and investments at the end of March according to its balance sheet. “The inorganic growth will complement our organic growth plans,” says the Piramal scion.

Under the deal, Piramal will secure marketing rights to Europe, Japan and other emerging markets. The US market is not covered in the deal. The company said it could leverage its sales and distribution network in Europe and other markets to expand its business. “Four of the acquired products are controlled substances, which have higher barriers to entry,” says said Peter DeYoung, chief executive officer, critical care at Piramal Enterprises.