KKR looking to scoop up Gland Pharma

India is feeling sensitive about pieces of its prized pharma industry being bought up by outsiders. The Indian government last week approved Mylan's ($MYL) $1.6 billion buyout of sterile drug specialist Agila Specialties, but not without a lot of hand-wringing over what it might mean for the domestic market. Now another, be it much smaller, deal is in the works for a U.S. investor to buy an Indian drugmaker.

Citing unnamed sources, The Economic Times said investment firm KKR is looking to take on a 40% share in the small but rapidly growing Gland Pharma in a deal valued at about $500 million. The deal would include the buyout of an existing investor, Evolvence India Life Science Fund, and a cash infusion of between $95 million and $110 million to pump up manufacturing. Indian investors would continue to own the majority stake.

Gland, established in 1978, has a key position in India with low molecular weight heparin and some other cardiovascular and orthopedic niche products. It also markets parenteral products along with Germany's Vetter. While KKR and execs at the company were not talking, the newspaper's sources were quite chatty. Sources said the company brings in about $150 million a year, about $45 million in profits, with half the revenue coming from the U.S., 30% from India and the rest from global sales. The company has seen some significant growth in the last 5 years, growing 5-fold in that time.

It's a small deal for KKR, which in June agreed to pay $1.3 billion for CRO PRA, but one source says it looks lucrative. The plan is for the increased manufacturing investment to give Gland the capacity to grow revenues another 5-fold in the next 5 years. "After this round of fund infusion, the company will achieve critical mass with reasonable size to remain competitive in the global environment. KKR will come as purely financial investors and will navigate it to the next level," one of the sources told The Economic Times.  Of course, KKR doesn't get into a deal without also having an exit plan, and the insiders said the idea is to take the company public on Indian exchanges at some point.

With fears that outside buyers will redirect production and sales away from low-priced drugs for the domestic market, there has been considerable worry in India about Indian drugmakers being bought out. The approval of the Mylan acquisition of Agila from Strides Arcolab is reportedly contingent upon Mylan maintaining Agila's current production levels of drugs on the country's essential medicine list for the next 5 years.

- read the Economic Times story