India's Aurobindo Pharma plans to unload its Chinese drug-ingredient unit to domestic producer Sinopharm in a phased-in deal. The Chinese unit makes a penicillin-derived ingredient, mostly for Aurobindo's use; the Indian company will keep a 19.5 percent stake to help ensure it gets the supply it needs.
The selloff is part of Aurobindo's plan to refocus on finished drugs--which deliver higher margins--rather than lower-yielding drug ingredients, Dow Jones reports. Over the past two years, the Indian company has nabbed deals to supply drugs to AstraZeneca and Pfizer.
For Sinopharm, the deal is a springboard: the current plant has insufficient capacity to deliver economies of scale, and so Sinopharm plans to put some money into the operation, relocate the plant, and grow production, the Economic Times reports.
Sinopharm will buy 51 percent of Aurobindo (Datong) Bio Pharma, or ADBPL, before boosting its stake to 80.5 percent. Aurobindo expects up to $50 million from the deal, which includes a debt repayment of $23 million.