It's a great time for Strides Arcolab to sell off its Agila Specialties unit. Thanks to shortages of injectable generic drugs--and Big Pharma's desires for revenue to offset generic competition--the Indian company may be able to sell that division for more than its own market value, Bloomberg reports. If, that is, it actually wants to sell.
A lot more, in fact. Ernst & Young figures that the injectables unit could command a multiple of 18 to 20 times earnings before interest, taxes, depreciation and amortization (EBITDA). That's at least $1.35 billion, Bloomberg calculates. And Strides' market cap stands at $832 million. Agila turns out some relatively difficult-to-make generics, and thanks to manufacturing problems at other Indian injectables suppliers, is now the "only manufacturer of high-quality sterile injectables from India," V. KrishnaKumar, a Mumbai-based M&A partner at Ernst & Young, told the news service.
"Agila is a very valuable asset today, more than at any other time," KrishnaKumar said. "Sterile injectable deals tend to be expensive because the assets are specialized. Large pharmaceutical companies looking to expand their generics portfolios should be interested in Agila."
Consider Pfizer ($PFE), KrishnaKumar suggested. The company is shedding units to home in on its pharma business, including its "value" drug operations, aka generics and OTC products. Adding some injectable assets--and emerging markets reach--to that portfolio could make sense. Or Hospira ($HSP), which already specializes in injectables, but has struggled with manufacturing issues of late. Agila "has good capacity and new facilities," a rival drugmaker in India told Bloomberg. That's 7 injectable drug plants in all, including a new antibiotics facility in Brazil.
Neither company would comment on a potential Agila buy. Nor would Strides confirm that it's actually selling off the unit. And there are reasons why it might not; some analysts figure that Strides would have little to recommend itself without Agila.
- read the Bloomberg analysis
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