Cipla to acquire US firm for ~ 15.6 billion

Cipla, the pharmaceuticals major, has signed an agreement to acquire the US-based speciality pharma firm, Avenue Therapeutics, for $215 million (~15.6 billion). This is in line with Cipla’s plan to build a speciality drugs pipeline in that country. The acquisition gets it access to a product under development in the pain management segment, which would be the first acquired speciality product it Cipla will have in the US.

Cipla has been a late entrant in the US market. It is now working on building its complex and speciality formulations pipeline there. The company expects growth in the US contribution to its consolidated revenue in the coming years, with about a third from there, another third from India and the remaining third from other emerging markets.

Ciplas US subsidiary, InvaGen Pharmaceuticals, will formally make the acquisition, in two stages. In the first stage, said the company, InvaGen or its affiliates will acquire a 33.3 per cent stake in Avenue via new shares for around $35 mn (expected to be 5,833,333 shares, at $6 each).

Upon completion of the first stage, InvaGen will appoint three members (including one independent) on Avenue's board of directors, currently comprising five members. In the second stage, InvaGen will acquire the remaining shares of Avenue’s common stock for up to $180 mn. It says this is currently expected to represent $13.92 a share. The scrip of the Nasdaq-listed entity closed on Monday at $4.16.

Kedar Upadhye, global chief financial officer at Cipla, said the second round of funds would be pumped in once Avenue gets approvals for the product under development, Tramadol Intravenous (IV). “It is a very de-risked structure, as the second round of fund infusions depends on fulfillment of some conditions. We expect the approvals to come in around late 2020 or early 2021,” he said.