MUMBAI: Domestic pharmaceutical companies Cipla, Zydus Cadilla, Dr Reddy’s Laboratories and private equity fund Baring Asia are among those evaluating the acquisition of Mumbai-based vaccine maker Bharat Serums and Vaccines Ltd. (BSV), according to two people familiar with the development.
The promoter Daftary family and existing investors Kotak Private Equity and Orbimed Asia are looking to sell their stake in the company at a $1 billion (Rs 7,059 crore) valuation and have mandated investment bank Jefferies to manage the sale process, which is expected to start in the coming weeks.
The two funds together hold a 23% stake and the remainder is with the Daftary family. The company has shelved a planned Rs 2,000 crore initial public offering that would have provided an exit for the investors, one person said. The company was valued at Rs 6,667 crore then, ETreported in December.
The funds had approached PE investors, including the Carlyle Group, in 2014 to sell their stake, which didn’t materialise.
BSV competes with Serum Institute of India, Biological E, Panacea Biotec and Shantha Biotechnics in India.
US drug company Mylan had prolonged negotiations with the company last year, but that too did not fructify.
The current discussions are preliminary in nature and may not lead to a transaction. The valuation is considered a key hurdle, industry experts said.
The company’s revenue was Rs 620 crore in FY17, with an operating profit of Rs 84 crore. For FY18, its operating profit is expected to be Rs 200 crore.
Emails sent to BSV managing director Gautam Daftary and the spokespersons of Orbimed, Zydus Cadila and Jefferies did not elicit any response.
Nitin Deshmukh, head of Kotak PE, and the spokespersons of Cipla, DRL and Baring Asia declined to comment.
BSV, which has 900 employees, sells products in India and in over 45 countries. They include plasma derivatives, hormones, equine anti-toxins and serums, antifungals, anaesthetics, cardiovascular and diagnostic products. BSV, with R&D facilities in India, Germany and the US, has companyowned and joint venture-based plants in Ambernath, Ahmedabad and Aachen, Germany.
“It’s largely a domestic and emerging markets portfolio.
So it made sense for a Mylan and still does for local players or someone like a Piramal who are looking to re-enter the formulations business,” a Mumbai-based industry analyst said on condition of anonymity.
Gujarat-based Cadila Healthcare Ltd., which operates under the brand Zydus Cadila, had formed an equal joint venture with BSV in 2005 to develop anti-cancer agents and bought out its partner in 2015.
Zydus Cadila has made multiple buyouts in the past few years, acquiring Sentynl Therapeutics, a US company that markets pain management products, last year and purchasing six therapeutic brands from Merck in 2016.
This month, it acquired a 51% stake in Dehradun-based Windlas Healthcare.
Baring PE Asia has been vying for a buyout deal in pharmaceuticals and was a contender for a controlling stake in Actis Capital-backed steroid maker Symbiotec Pharmalab.
Domestic pharma players eye Bharat Serums acquisition
Actis holds a 70% stake in the Indore-based pharmaceutical company, one of the largest global firms in the cortico-steroid and steroid-hormone segment.
India’s biotech industry currently has a 2% share of the global market and is the third-largest in the Asia-Pacific region.
“We expect biotech products worth $55 billion getting off-patent globally by 2030, giving a huge opportunity for biosimilar makers,” said Kewal Handa, former MD of Pfizer India.
“In this backdrop, investing in abiopharmaceutical company with a good R&D and product pipeline will be a sure bet for Indian drug makers.”
India’s biotechnology sector, growing at 20%, was expected to touch $11.6 billion by 2017, according to a report by the Department of Biotechnology last year.
PE investors are also looking to exit their 10-year old investment in Bharat Biotech International Ltd. Investors including ICICI Venture, International Finance Corp. and Subhkam Ventures together hold about 30% in the company.
There have been only a few buyouts in India’s biotechnology space. Sanofi’s acquisition of Shantha Biotechnics, a leader in vaccine manufacturing, for about Rs 3,000 crore in 2009 was one of the largest in this segment.
Compared with the high volume of investments in generic pharmaceutical sector, biotechnology has seen only a handful private equity investments.
Quadria Capital, a healthcare-focussed PE fund, invested about Rs 500 crore for a 20% stake in Concord Biotech Ltd. in 2016. Ahmedabad-based Concord is a research and development-driven biotech firm that makes bulk drugs. Ace investor Rakesh Jhunjhunwala holds a 30% stake in Concord.