Strides Arcolab Ltd. (STR), a supplier of anti-cancer drugs to Pfizer Inc. (PFE), surged the most in seven years after selling its Ascent Pharmahealth Ltd. (APH) unit to Watson Pharmaceuticals Inc. (WPI) for A$375 million ($393 million) in cash.
Ascent had revenue of about A$150 million in 2011 from selling generic and over-the-counter drugs in Australia and Southeast Asia, and had a 14 percent share of the Australian market, Parsippany, New Jersey-based Watson said in a statement today. The sale would allow Bangalore-based Strides to focus on its more profitable injectible-drugs business.
“This is a win-win deal for both Strides and Watson,” said Siddhant Khandekar, a health-care analyst at ICICI Direct in Mumbai. “We were expecting a valuation of about two times sales and this figure is more than that.”
The sale values Ascent at about 2.5 times its sales and includes a network of about 300 employees and a factory in Singapore, Arun Kumar, chief executive officer of Strides, said in an interview. Strides, which operates 13 manufacturing plants in India, Europe and Africa, would continue supplying drugs to Ascent after the acquisition, he said.
“We have been clear about our intention to focus on our highly attractive steriles segment, which we expect to be our growth engine going forward,” Kumar said in the statement. Strides will use $250 million from the sale to pay off its debt, that would include a $120 million charge to redeem foreign currency convertible bonds maturing in June, Kumar said.
Strides was advised by Jefferies Group Inc. (JEF)
“We will use the money to accelerate growth in our injectibles business” and expand the Inbiopro unit, Kumar said.
Strides acquired the biotech company in Dec. 2010 to gain entry into the market for so-called biosimilars, copies of medicines designed to mimic substances found in the body such as hormones and antibodies.
Watson, the maker of the authorized copy of Pfizer’s cholesterol pill Lipitor, funded the acquisition using cash-on- hand and borrowings from its revolving credit facility, according to the statement.
“The deal is expected to be immediately accretive to 2012 non-GAAP earnings,” Watson said in the statement.
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