Wockhardt sells part of branded biz to Dr Reddy’s
THE DEAL, WHICH IS VALUED AT ₹1,850 CR, IS EXPECTED TO BE COMPLETED WITHIN THREE MONTHS OF THE BOARD’S APPROVAL
MUMBAI: Drugmaker Wockhardt Ltd on Wednesday said it has agreed to sell a part of its domestic branded formulations division, along with a manufacturing facility at Baddi in Himachal Pradesh, to Dr Reddy’s Laboratories Ltd for a consideration of ₹1,850 crore.
The transaction, once cleared by the company’s shareholders, lenders and regulatory authorities, is expected to be completed within three months of the board’s approval, by May 12, the company said in an exchange filing.
Wockhardt’s domestic formulations business, which consists of 62 products in various therapy areas including pain management, neurology, respiratory, dermatology, cardiology and diabetology, earned total sales of about ₹377 crore, comprising about 15% of the consolidated revenue of Wockhardt, for the nine months ended December 31.
The company said the proposed deal values the domestic branded division along with the related business assets and liabilities, contracts, permits, intellectual properties, employees, marketing, sales and distribution, at nearly 3.8 times its annualized revenue.
After completion of the transaction, Wockhardt would still own a significant part of the domestic branded business constituting chronic and speciality portfolios, along with the formulation plants located at Waluj, Shendra and Chikalthana in Aurangabad, Bhimpore and Kadaiya in Daman.
“The intended sale of business portfolio is in line with the company’s strategic plan to shift from acute therapeutic areas to more chronic business like anti-diabetes, CNS (central nervous system) etc. and also to its niche antibiotic portfolio of NCES (new chemical entities),” said Habil Khorakiwala, founder and chairman of the Wockhardt Group.
The sale of the business, Wockhardt said, will provide the company with adequate liquidity for growing its international operations and investments in biosimilars for the US market. Further, it would enable the firm to strengthen its remaining domestic branded business portfolio and refocus it towards the chronic segment with a differentiated product portfolio.
The Mumbai-based pharmaceutical firm continues to own all the international operations in the UK, the US, Ireland and other locations through step-down subsidiaries.
Shares of Wockhardt fell following the announcement, ending 7.2% lower at ₹365, according to data from the NSE.
“The Wockhardt stock reacted negatively after the announcement as the market was expecting a much higher capital raise of nearly ₹2,500 crore from the divestment, whereas the deal happened to raise only ₹1,850 crore. Wockhardt also has significant short and long term debt but it does not intend to use the proceeds from this transaction to pare debt, which also triggered a negative response from the investors,” said Kunal Dhamesha, lead healthcare analyst at SBICAP Securities Ltd.