Mylan gets $70M from Strides to settle issues over sterile injectables biz

Syringe

Three years after Mylan ($MYL) bought the sterile injectables business of India’s Strides Shasun, the two companies have settled issues over FDA regulatory concerns, with Strides agreeing to pay Mylan an extra $70 million out of an escrow account.

In a filing with the Bombay Stock Exchange today, Strides said that the regulatory concerns have been settled with a payment to Mylan from a $100 million regulatory escrow and with Strides receiving the balance in the account of $30 million.

When the two closed the $1.75 billion deal for Agila Specialties in 2013, Strides had put $200 million into escrow, $100 million to cover potential future regulatory concerns and $100 million to cover claims on warranties and indemnities, including taxes.

As far as the other matters, the filing says “Strides and Mylan have now agreed on a full and final settlement of the Warranty and Indemnity Claims. The general claims escrow continues to be valid till December 2017 and pertains to tax and certain potential third party claims.” 

Mylan announced the nine-plant deal for Agila Specialties in February 2013 as a way to establish itself as a key player in the generic sterile injectables market. But by the time the deal closed 10 months later, one of Agila’s three plants in India had been issued a warning letter by the FDA. Within 18 months, all three Indian plants had been cited in warning letters, with the FDA finding problems that risked contamination of sterile drugs.

Mylan pledged to make improvements to resolve those problems but shortly after, Strides announced Mylan had indicated it expected Strides to cough up some of the escrow money to cover those expenses.

More issues with the Agila facilities arose this year when Mylan said it had stopped production at a plant in Poland after European regulators raised concerns about modifications the plant in Warsaw had made in its HVAC system that were hampering pressure and airflow in sterile manufacturing areas.