Strides Group, the Indian drugmaker that sold its injectable drug business to Mylan Inc. for $1.6 billion, is building an animal health unit that it could later sell or spin off.
The group aims to create a global top-10 veterinary drug business in five years by acquiring companies that give it access to the cattle and poultry industries in the U.S., Brazil and Australia, said Manish Gupta, managing director of Sequent Scientific Ltd., which is part of the Strides group of companies.
Sequent, which supplies bulk drug ingredients to the world’s biggest animal health companies including Zoetis Inc. and Merck & Co., is aiming for a bigger piece of the $30 billion market for veterinary products. It is investing in new animal-health facilities in Turkey and India as the U.S. Food and Drug Administration warns animal health companies over outdated facilities.
Animal health companies have “old, poor quality manufacturing sitting in the western world,” Sequent’s Gupta said. “There is an undercurrent in this industry, which requires better quality manufacturing. It has not yet surfaced in a big way -- but it’s a matter of time.”
The FDA last year raised concerns about quality systems at Virbac SA’s manufacturing site in St. Louis, Missouri and the company halted production at the site. While some production has resumed, a number of important products will only return to the market in the second half of the year and the U.S. unit will see a “significant drop” in revenue this year, the company said last month.
Bayer AG last month closed down production at its plant in Missouri that it got in 2013 as part of its acquisition of Teva Pharmaceutical Industries Ltd.’s U.S. animal health business, and is exploring options to divest assets of the site, a spokeswoman wrote in an e-mail.
Bengaluru-based Sequent is the world’s biggest supplier of bulk ingredients for drugs to treat parasitic worms, and supplies finished animal health drugs in India and Africa.
The company last year bought a controlling stake in Provet Veterinary Products AS in Turkey and aims to use its facilities to supply veterinary drugs in the U.S. and Australia in two to three years.
Sequent is also looking for acquisitions to help it grow in regulated markets overseas by adding approved products and local teams who can sell to veterinarians treating cattle and to poultry companies in the U.S., Australia and Brazil. The company will also need to acquire local manufacturing capacity in Brazil, Gupta said.
“Fundamentally our model is that we will create some disproportionate value for our shareholders and eventually return the money back to the shareholders,” said Gupta. “It’s slightly akin to what was done in Strides.”
Started in 1990 by Arun Kumar and K.R. Ravishankar, Strides began manufacturing injectable drugs five years later and entered the U.S. market for sterile products in 2004. Mylan agreed to purchase Strides’ injectables unit Agila Specialties in 2013, amid a shortage of injectable drug manufacturing capacity caused by rising FDA scrutiny of the way these medicines are manufactured.
Sequent’s shares rose 0.44 percent to 795 rupees at 12:31 p.m. in Mumbai trading. Its shares have risen about 60 percent this year, even as India’s benchmark S&P BSE Sensex index is unchanged.
In addition to animal drugs, Sequent makes niche bulk ingredients for human drugs, and is licensed by Gilead Sciences Inc. to make the bulk ingredient for generics of its hepatitis C treatment Sovaldi. Human drug ingredients contributed 44 percent of Sequent’s sales in the three months ended March 31.