Strides Said to Consider Sale of Injectable-Drugs Unit

Pfizer Supplier Strides Said to Consider Sale of Agila Unit
Strides provides Pfizer with generic versions of off-patent drugs through a partnership announced in 2010. Photographer: Munshi Ahmed/Bloomberg

Strides Arcolab Ltd., a supplier of cancer-fighting drugs to Pfizer Inc., is considering selling its injectable-medicines unit, three people with knowledge of the matter said.

The unit, called Agila Specialties, may be valued at more than Bangalore-based Strides’s current market value of about $800 million, two people said, declining to be identified as the information is private. Agila’s relative success in winning approvals for new products and the scarcity of facilities able to manufacture injectable medicines make it an attractive target for drugmakers, they said.

“Injectables is certainly a very lucrative business because there’s less competition, flexibility in pricing, and opportunity for higher profit margin compared to just simple generics,” said Surya Narayan Patra, an analyst at Systematix Shares & Stocks Ltd. “If some big generic player is looking to ride the global injectables story, then this acquisition may look attractive.”

Agila’s sales rose 48 percent to 10.2 billion rupees ($185 million) in 2011 and may expand to about $350 million by next year, according to Patra and Nitin Agarwal, a pharmaceutical analyst at IDFC Securities Ltd. in Mumbai.

The unit may be valued at four to five times sales, which is in line with recent pharmaceutical transactions in India, Agarwal said. At 4 1/2 times Agarwal’s sales estimate, Agila is worth about $1.6 billion. The median multiple paid in 20 purchases of Indian pharmaceutical assets over the last five years was 4.78 times sales, data compiled by Bloomberg show.

Strides gained as much as 5.5 percent today, and was up 3.1 percent at 767 rupees as of 3:12 p.m. in Mumbai. At that price its market value is about 45 billion rupees.

Pfizer Supplier

T.S. Rangan, chief financial officer at Strides, declined to comment on market speculation, in an e-mailed response to questions. A formal sale process may begin in the next few months, the people said.

Strides provides Pfizer with generic versions of off-patent drugs through a partnership announced in 2010. It received U.S. Food and Drug Administration approval for oxaliplatin injection used to treat advanced cancer, the company said yesterday. The drug will be distributed in the U.S. by Pfizer. Agila also has partnerships with GlaxoSmithKline Plc and Novartis AG, according its website.

In May 2009, Novartis AG paid about 4.7 times sales for Unterach, Austria-based Ebewe Pharma’s injectable-drug unit in a $1.2 billion purchase. Mylan Inc. acquired closely held injectable-drug business Bioniche Pharma Holdings Ltd. for $550 million in 2010, paying about 4.2 times annual revenue.

Also that year, Abbott Laboratories announced the acquisition of Mumbai-based Piramal Healthcare Ltd.’s branded generic-medicine unit for $3.72 billion, paying about 8.7 times sales. That sale was also for more than Piramal’s $2.5 billion market value at the time, data compiled by Bloomberg show.

Highest Approvals

Agila had the highest number of injectable-medicine approvals by the FDA for its generic drugs, with 32 from 2008 to 2010, compared with 23 at Hospira Inc., according to a May presentation. The company has eight manufacturing facilities in India, Brazil and Poland, according to its website.

Strides sold Ascent Pharmahealth Ltd., its Australian and Southeast Asian unit, to Watson Pharmaceuticals Inc. in January for A$375 million ($397 million) in cash. When the sale was announced, Strides’s market value was about $475 million, according to data compiled by Bloomberg. The company’s shares have risen 85 percent since then, through yesterday.

While Patra of Systematix said he doesn’t think Strides should sell Agila, he noted that the company is comfortable selling businesses if the price is right.

“Considering the track record of the management, it is not unusual to expect such a thing,” he said.

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