India's Cipla made its name in the west as a leader in challenging Big Pharma patents on expensive drugs in an effort to cut their prices in a country with a large need and little money. But it has lagged behind its compatriots in challenging U.S. drugmakers on their own turf, currently getting less than 10% of its revenues from the lucrative U.S. market. The company is making moves to change that equation, announcing a small deal on Friday to buy two U.S. focused generics companies.
|Cipla CEO Subhanu Saxena|
Cipla said it will pay $550 million for InvaGen Pharmaceuticals, a Hauppauge, NY-based generics maker with 32 products in the market and 30 in the pipeline, as well as Exelan Pharmaceuticals, a Lawrenceville, GA, operation that markets and sells InvaGen's products into the government and institutional markets. It said with InvaGen, it also gets a 350,000-square-foot manufacturing plant--its first production facility in the U.S.--an R&D operation and 500 employees.
Global CEO Subhanu Saxena in a statement called the buy a good fit for his company that is "in line with its strategy to grow Cipla's share in the U.S. pharmaceutical market." InvaGen CEO Sudhakar Vidiyala said the deal allows his company to tap global markets.
Other Indian drugmakers have grown into sizable operations by feeding the demand from the U.S. for cheap generics. Sun Pharmaceutical's $4 billion buyout this year of troubled Ranbaxy Laboratories was in large part an effort to quickly build U.S. market share. Before regulator problems undermined its efforts, Ranbaxy had won many first-to-file generics approvals for blockbuster drugs like for Pfizer's ($PFE) Lipitor and Novartis' ($NVS) blockbuster Diovan and AstraZeneca's ($AZN) Nexium. The melded operations of the two are expected to generate $2.3 billion in U.S. sales for Sun, half of total revenues.
Other Indian drugmakers also are following that same playbook, buying U.S. operations to get more financial heft in the States as well as executives that know the ropes in the country. Lupin in July snapped up GAVIS Pharmaceutical, a New Jersey company founded by Veerappan Subramanian, paying $880 million to nail down its first U.S. manufacturing site and a portfolio of products.
Cipla has obviously been in the hunt for a U.S. deal and was mentioned along with Lupin as a potential bidder for UCB's U.S.-based generics business. That instead went this week in a $1.23 billion deal to Lannett ($LCI), a rapidly growing U.S. generics maker. And Cipla has been forging deals with partners in other parts of the world. In April it said it had paid $418 million to buy a Brazilian drug distributor and earlier did deals in Morocco, Iran and Yemen, countries where western drugmakers are still uncertain about making moves.
Even with the InvaGen deal, Cipla's sales in the U.S. will be relatively small. Surajit Pal, an analyst at Prabhudas Lilladher Pvt. in Mumbai told Bloomberg that "With their own growth and these acquisitions, their sales in the U.S. may reach $450 million to $500 million." But Pal said the deal allows Cipla to "fill a gap," in its business.