Sagent Pharmaceuticals ($SGNT) jumped into the sterile injectables manufacturing arena a decade ago, backed by private equity money and sporting a unique model. It would concentrate on high-demand generics but instead of manufacturing them itself, it would rely on a network of dozens of contractors to source its ingredients and get its finished products. Now, with evaluations high but margins getting thinner, it is thinking about cashing out.
Sources tell Reuters that the Schaumburg, IL-based company has advisory firm Perella Weinberg Partners out shopping the $200 million company. Interest is already coming in from a handful of Indian drugmakers, according to the International Business Times, also citing sources. While the sources made it clear a deal is not a certainty, they told IBT that Torrent Pharmaceuticals, Aurobindo Pharma, Cipla, Lupin and Dr. Reddy's Laboratories ($RDY) have all expressed interest. India's largest drugmaker, Sun Pharma, is said to have also given it a look but reportedly moved on after hearing the company would cost more than $500 million.
While Sagent still relies on contractors for the majority of its manufacturing, it has evolved its operations in the past couple of years, starting with a partnership with Chengdu Kanghong Pharmaceuticals for construction of a 300,000-square-foot, FDA-approved facility in Chengdu. Sagent paid Chengdu Kanghong $25 million in 2013 to take full control of the facility.
The idea of relying on contractors was to be able to get the best deal and quick turnaround times so that it could quickly scale up production if demand, and so prices, for a drug surged, often in the face of a shortage caused by a plant interruption by another manufacturer. But Sagent decided it needed some of its own manufacturing capacity when some of its contractors ran into issues.
Last year it transferred production of atracurium besylate injection to its own plant after the FDA spotted GMP problems at its contractor, Emcure Pharmaceuticals. It also previously recalled two lots of zoledronic acid injection and separately recalled three lots of the nonsteroidal anti-inflammatory drug (NSAID) manufactured by India's Cadila Healthcare.
There has been quite a bit of M&A action around sterile injectables in the past few years. Last year, Pfizer ($PFE) bought sterile injectables leader Hospira for $15 billion. Hikma expanded its operations the year before by picking up the Ben Venue line of injectable drugs from Germany's Boehringer Ingelheim, while in 2013 Mylan laid out $1.75 billion to buy Agila Specialties, the sterile injectables business of India's Strides Arcolab, now Strides Shasun.