Natco Pharma has set out for 10 more similar buys in the US to establish the first Indian-owned pharmacy chain in the country.
HYDERABAD: Having tasted success with its first overseas acquisition, Natco Pharma has set out for 10 more similar buys in the US to establish the first Indian-owned pharmacy chain in the country.
Setting a trend of sorts, Natco had acquired 75% share in Newark, New Jersey based Nick’s Drug Store at a cost of $3.5 million in January, making it the first pharma retail acquisition by an Indian company in the US.
Following the acquisitions, Natco could see revenues of $100-150 million by December, company sources told DNA Money. Nick’s drug store was expected to have revenues of over $22 million and profit of $2.2 million in a full year of operation and estimated to add at least 50% to Natco’s topline and improve margins by 10%.
The acquisition has already yielded revenue of Rs 11.18 crore in just two months for Natco up to March 31, 2006, the sources said.
Natco’s strategy of making front-end retail acquisitions is based on the realisation that off-patent products may not yield the kind of revenues envisaged earlier, thanks to extreme competition. Also, marketing tie-ups with established players are costly as a company has to share not only the expenses but also profits.
Further, having its own retail presence in the US, the biggest pharma market in the world, provides Natco an outlet for its own generics as and when they are launched.
Currently, nearly 30% of Natco’s exports are accounted for by the US market where it has lined up several product launches in the coming days.
The US drug distribution business is dominated by four large players including CVS Pharmacy and Wal-Mart, which control 90% of the market and transfer huge margins to the retail trade that includes independent drug chains. Typically, distribution chains retain anything up to 5% while retail chains corner a major portion of the cost.
While a part of the funds required for the acquisition of Nick’s Drug Store was met from internal accruals, the rest was raised from the Exim Bank of India.
A similar arrangement is available for the remaining acquisitions that are currently in process, company officials said. However, they did not divulge the cities or the target acquisitions.
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