Reuters and Bloomberg
JSE-listed medicine producer Adcock Ingram is to purchase a portfolio of about 60 medicines and a distribution network from India’s Cosme Farma for 4.8 billion rupees (R710 million) in cash to bulk up its presence in the country’s $16 billion (R131bn) pharmaceutical market
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The deal will give Adcock distribution facilities in 27 Indian states and a range of medicines covering dermatology, gynaecology, gastro-intestinal and orthopaedic medicine.
Adcock, which has a wide offering of over-the-counter generic products, could also benefit from New Delhi’s $5.4bn plan to provide free generic medicine to hundreds of millions of people.
“It makes good sense strategically but it looks like they paid a hefty fee for it, which is the premium you pay to get exposure to those high-growth opportunities in India,” Avior Research health-care analyst Mathew Menezes said.
“This means they have to deliver on significant sales growth without compromising on margins in a competitive market like India.”
Adcock’s purchase price represents a premium of nearly 13 times Cosme’s earnings before interest, tax, depreciation and amortisation.
Privately held and family-owned, Cosme is a pan-Indian pharmaceutical firm based in Goa with offices in Mumbai. The company has a sales force with about 1 000 staff, making it a smaller player in India’s vast market.
Adcock already owns a manufacturing plant in India, where the pharmaceutical market has been forecast to book compound annual growth of 16 percent in the five years to 2016, according to IMS Health, a health-care information company.
Adcock expected the deal to add about R250m a year to its revenue, which now stood at R4.5bn, deputy chief executive Andy Hall said yesterday .
He added that Adcock was looking for acquisitions in Africa as well. The company already has a presence in Ghana and Kenya.
“We still have a couple of deals of similar scale in terms of size of operation, and in terms of revenue, that we’re looking at on the African continent,” Hall said. “We could spend between R3bn and R4bn on acquisitions.”
“India probably has bigger growth opportunities at this stage, but we are actively looking in west and north Africa.”
Adcock’s foreign expansion has been slower than local rival Aspen Pharmacare, which has already made an aggressive push overseas.
Adcock, which aims to have 30 percent of its sales from outside its home market in about two years, has been teaming up with global pharmaceuticals companies such as Merck to co-distribute products in Africa.
Shares in Adcock Ingram closed 1.75 percent higher at R61.71 yesterday.