India's Strides flirts with sale of generics unit

Comment or no comment? Strides Arcolab's managing director made headlines earlier this week by suggesting that the company might be open to selling off a business unit that makes generic pills and capsules. The Indian company wants to focus on growing its specialty drugs business, Agila Specialties, which means making more injectible meds, Arun Kumar told Dow Jones.

The reason for the potential move isn't tough to figure: Margins on specialty drugs are higher than those on cheaper pills. The solid-dose side of the business markets branded generics and supplies treatments for AIDS, tuberculosis and malaria to public health agencies. Agila sells injectible antibiotics, cancer drugs and other specialty products, some of them via supply deals with Big Pharma companies such as Pfizer ($PFE) and GlaxoSmithKline ($GSK).

Agila's sales accounted to a little more than a third of the company's revenues, but delivered more than half its profit, Dow Jones points out. And Kumar figures that 90% of Strides' future growth would come from that unit. Also, Agila might need capital for expansion, he said.

So, Strides wouldn't "shy away from the opportunity" if someone came along to bid for the company's non-specialties business, Kumar told the news service. No formal negotiations are underway now, he said, and the company is open to various "strategic options," he said.

After Kumar's comments, Strides saw its shares jump as much as 12.4%. So, Bloomberg followed up with the company's CFO, T.S. Rangan. "We cannot offer any comment," Rangan told Bloomberg, but added, "Obviously when you have to build an injectible business, you have to defocus" on other businesses. Just the kind of non-denial denial a potential bidder could take as encouragement.

- get the Dow Jones piece
- see the story from the Business Standard
- read the Bloomberg news

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