India’s Wockhardt, which has had its financial fortunes dampened for several years by FDA-related manufacturing issues, has decided to improve its cash flow by selling a plant and portfolio of products to a competitor, a move that will raise more than $250 million.
The drugmaker will sell the plant in Baddi, Himachal Pradesh, India, a portfolio of 62 products and transfer all of the employees and operations of them to Dr. Reddy’s Laboratories for INR 1,850 crore ($260 million ).
In a filing today, Wockhardt said the business being offloaded include some of its branded operations in India, as well as in Nepal, Bhutan, Sri Lanka and the Maldives. It said the business had sales of about INR 377 crore ($53 million) for the nine months that ended Dec. 31. That amounted to about 15% of its consolidated revenues for the three quarters.
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The Indian company said the deal to sell more acute care drugs and focus on more valuable areas like diabetes drugs and its niche antibiotic portfolio which includes work on drugs against superbugs. The FDA has given five of its candidates Qualified Infectious Diseases Program status.
“The divestment will also ensure adequate liquidity to bring in robust growth in the chronic domestic branded business, international operations, investments in biosimilars for the U.S.” and other R&D, Wockhardt Chairman and founder Habil Khorakiwala said in a statement.
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The company pointed out that after the sale, slated to be completed in May, it will still maintain a significant amount of its Indian business, as well as operations in the U.S. and U.K., and still have a number of bulk drug and formulation plants, several of which are those criticized by the FDA.
It said the deal also will “strengthen the balance sheet.” That is important after several years of losses, a string that was broken in the last quarter when it reported a small profit. The drugmaker has made progress since 2017 when the FDA savaged Wockhardt’s management for a history of manufacturing failings. A string of seven warning letters hurt its ability to sell in the U.S.