Mylan eyes injectables domination with $1.6B Agila buy

Mylan ($MYL) is exercising its injectable-drugs ambitions. The U.S. based generics maker is snapping up Strides Arcolab's injectables unit Agila Specialties for $1.6 billion. That's a nice premium for the Indian company, but given the ongoing shortages of generic injectables, the price may be right.

The deal will give Mylan another 200 marketed products for its injectables portfolio, bringing its total to 700. And the Indian company comes with a solid track record for approvals--some 350 more products are in various stages of development around the world--and 7 manufacturing plants. It will also add considerably to Mylan's geographic footprint, offering an entrée into growth markets such as Brazil, where Agila has a new antibiotics facility.

In a statement, Mylan CEO Heather Bresch said her company wants to be "a top-three global player" among injectable drugmakers, and this deal "will immediately create a new, powerful global leader in this fast-growing, attractive market segment." In fact, the company said, it will roughly double Mylan's injectable sales of $500 million in 2012.

She also cited Agila's "state-of-the-art, high quality injectables manufacturing." And that's important, with hundreds of drugs still running short in the U.S., many are scarce because of manufacturing violations and other production problems.

Leerink Swann analyst Jason Gerberry figures the deal will add 4% to Mylan's 2014 earnings, but could be more than that, given possible cost-cutting opportunities as the companies integrate. Strategically, Agila not only gives Mylan a presence in Brazil, but the potential for substantial growth in U.S. injectables, where its drugs have "barely scratched the surface," Gerberry wrote in a note to investors, citing management's conference call with analysts.

Plus, Agila has supply and manufacturing deals with several big drugmakers, including Gilead Sciences ($GILD), GlaxoSmithKline ($GSK) and Novartis ($NVS). In December, it inked a new deal with Eli Lilly ($LLY) to bring branded generic cancer drugs to India and other emerging markets.

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