Strides to buy out Aspen in ventures

Strides Arcolab, Bangalore-based drug firm, will buy its South African partner Aspen Pharmacare’s stake in their two oncology joint ventures for $117 million.

The two companies had formed 50:50 joint ventures — Onco Laboratories and Onco Therapies — in 2007.

According to Arun Kumar, vice-chairman and group CEO, Strides, the restructuring will help the company in its greater focus on the specialties division.

TS Rangan, group CFO, said between 2007 and now Strides entered into licensing agreements with biggies like GSK and Pfizer to supply generics, and having a core focus on specialty business will further help the deals with the Big Pharma.

“We felt we will be better with 100% in the oncology business.”
In 2008, Strides entered an agreement with GSK to supply products to 80 countries, and in January 2010, signed an agreement with Pfizer to supply 40 generics in the US.

The Rs 1,300 crore Strides, which is targeting turnover of Rs 1,775-1,800 crore by December 2010, currently has 40 oncology products. “Majority of our growth will come from specialty business,” Rangan said.

According to Ranjit Kapadia, vice-president, institutional research at HDFC Securities, the GSK/Pfizer deals would necessitate huge manufacturing capacity to be in a position to supply generics whenever needed and the acquisition will help towards that extent.

This is the company’s second deal with the South African company in less than a fortnight.

In the first week of March, Strides agreed to buy Aspen’s Campos facility in Brazil for $75 million.

The Campos plant manufactures penems and penicillin and is projected to deliver $40 million on an annualised basis.

“Incremental growth in 2010 is mainly attributable to the inorganic strategies, multiple product launches from new capacities, and strong licensing income in the core specialties business,” the company said.

The total payout of $192 million, including $75 million for Campos facility and $117 million for oncology joint venture stakes, will be done over 14 months, Strides said.

“The company proposes to discharge its obligation through a combination of licensing income and bridge loans...The payment terms are based upon certain future milestones with an outside date for settlement of all outstanding amounts by April 30, 2011,” it said, adding that it expects the debt to equity ratio in April 2011 to be similar to that on December-end.

As per the deal, Strides will license the existing and future oncology products of these two entities to Pharmacare Ltd, an Aspen Group company, for certain territories. “While the restructuring of the oncology arrangements with Aspen provides Strides greater focus and ownership of a key domain in our specialties division, we are delighted to strengthen our existing strong partnership with Aspen by entering into a licensing agreement in territories where Aspen has established distribution,” said Arun Kumar, vice-chairman and Group CEO of Strides.
With NW18