Hikma shells out $2.65B for Boehringer's U.S. generics business

Hikma CEO Said Darwazah

When Boehringer Ingelheim put its U.S.-based generics business on the market, Hikma Pharmaceuticals, Mallinckrodt ($MNK) and Perrigo ($PRGO) reportedly pulled up seats at the bidding table. But Hikma emerged the winner, snagging Boehringer's Roxane Labs unit for $2.65 billion to substantially boost its noninjectable generics business.

Under the terms of the deal, the Amman, Jordan-based drugmaker will pay $1.18 billion in cash and issue 40 million new shares to Boehringer, handing it a 16.7% stake in the company. Hikma will also shell out up to $125 million based on performance milestones. When all is said and done, the purchase will make Hikma the sixth largest supplier of generic drugs in the U.S., the company said in a statement.

"Roxane represents a great opportunity for us to grow in the U.S.," Hikma CEO Said Darwazah told Bloomberg. "We liked the asset since the moment we saw it and we are happy that we won after a very competitive process."

This is not the first time Hikma has struck a deal with Boehringer. Last year, the company paid $300 million in cash and performance-related milestones to grab assets and injectable products from Boehringer's Ben Venue Laboratories unit. The company also bought a flailing Ben Venue plant in a separate deal, and has since gutted the facility and used equipment in other plants.

The latest deal has the potential to quadruple Hikma's generics sales. Last year, Hikma's nonbranded business brought in $215 million, or 15% of its revenues. Now the company is eyeing sales of $725 million to $775 million from Roxane in 2017, Hikma said in a statement, with 88 Roxane products chipping in. And Roxane's Columbus, OH, manufacturing plant will also give Hikma the tools it needs for noninjectables expansion, allowing the company to make solids, liquids, nasal sprays and dry powder inhalers.

Analysts seemed pleased with the deal, saying it "represents good value" compared with the median purchase price for similar transactions, Stifel Nicolaus analyst Max Herrmann and colleagues wrote in a note to investors, as seen by Bloomberg. Hikma paid about 10 times Roxane's estimated earnings before interest, tax, depreciation and amortization for 2017. "We continue to believe the company has superior long-term growth prospects," Herrmann said, as quoted by Bloomberg.

Hikma's acquisition of Roxane also comes amid more dealmaking, as companies look to grab bigger pieces of a rapidly consolidating generics market. In January, Pfizer ($PFE) agreed to pay $15 billion for generic sterile injectables specialist Hospira ($HSP). In May, Endo ($ENDP) paid $8 billion for Par Pharmaceutical to get its hands on Par's generics portfolio. Earlier this week, Teva ($TEVA) said it would buy Allergan's ($AGN) generics business for $40.5 billion, solidifying its position as the world's largest generics maker.

Hikma is content with its latest spate of M&A and doesn't see any more big acquisitions on the horizon, Darwazah told Reuters. The company "is not in the race to be No. 3" and will focus instead on adding products and technology, the CEO added.

"We won't be the size of Teva and other big companies, but we will be bigger than many other companies that were ahead of us over the last 5 years," Darwazah told the news service.

- read Hikma's statement
- here's the Bloomberg story
- get more from Reuters

Special Reports: Top 10 Drugmakers in Emerging Markets | The top 10 largest pharma layoffs in 2013 - Boehringer Ingelheim

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