UCB hands over South Asia branded drugs to Dr. Reddy's in latest slimdown plan

UCB COO Mark McDade

Belgium's UCB is slimming down, selling some of its branded products in South Asia to Dr. Reddy's Laboratories for $128.38 million to focus on its neurology portfolio in India.

The deal hands Dr. Reddy's brands in India, Nepal, Sri Lanka and the Maldives, helping the Indian company gain ground in respiratory, dermatology and pediatrics, Reuters reports. The business produced revenue of about 1.5 billion rupees ($23.9 million) in 2014, and Dr. Reddy's will also pick up 350 staff members as part of the agreement.

"Finding the right company for our established brands and our team in India was crucial, and Dr. Reddy's knowledge of the local market combined with their ambitious plans and excellent reputation convinced us they were the right choice to drive this business forward," UCB COO Mark McDade said in a statement.

But not everyone is an optimist about the deal. Some analysts expressed concern about the acquisition cost which values the UCB business at more than 5 times its sales, higher than the industry standard, Reuters reports. "You would demand this kind of valuation when you're buying the leader in the industry. And I'm not sure if Dr. Reddy's has got leading brands from UCB," Equirus Securities analyst Nimish Mehta told the news service.

Still, the price is less than the $135 million that sources last month told Reuters was being discussed and Dr. Reddy's cash and market investments are worth $456 million, making it well equipped to forge a deal.

UCB's slimdown move comes a few months after the company abandoned a $1.53 billion sale of its U.S. generic drug business, Kremers Urban Pharmaceuticals, amid regulatory pushback over one of the unit's products. The Brussels-based company called it quits on the sale after the FDA asked for an additional study on Kremers' copy of Johnson & Johnson's ($JNJ) Concerta pill for attention deficit hyperactivity disorder (ADHD). UCB said at the time it would move forward with a sale in the future, but needed to clear up the regulatory hullabaloo first.

"We are of course disappointed that we could not complete the transaction as planned at this time but believe that the mutual termination is the right step to allow time for the needed evaluation of the best way forward and as a result to create the most value," UCB CFO Detlef Thielgen said at the time.

- read the UCB release
- here's the Reuters story