Cipla only Indian firm to bid for Kremers Urban Pharmaceuticals Inc.

Cipla, India’s third largest drug maker is planning to grow even larger. The firm has now come up as the only Indian contender for Kremers Urban Pharmaceuticals Inc, the specialty generics drug business of the $4 billion Belgian drug maker UCB.

If the Indian drug maker successfully closes the deal, which is pegged at around $1.3 billion, it will cast a shadow on Lupin's recent $880 million buyout of Gavis Pharma.

Lupin and Torrent Pharma were other Indian parties that had initially shown interest but eventually opted out.

The previous year’s report has said that Kremers Urban Pharmaceuticals Inc had sales of $463 million.

According to industry insiders requesting anonymity, “Cipla is the only Indian bidder for KU but it is pitted against a few powerful private equity players. It also depends on whether Cipla is prepared to shell out a large amount in a single bid."

UCB floated the divestiture of Kremers Urban last year, noting that it will help reduce its debt load, and planned to focus on its core focus areas of immunology and neurology drugs. Last November, two private equity players— Advent International and Avista Capital Partners—had jointly agreed to buy Kremers as part of an all cash deal of $1.525 billion.

The deal, however, was aborted in December 2014 citing unresolved regulatory issues for approval of its methylphenidate extended-release (ER) tablets. The US FDA directed Kremers to conduct additional studies to prove equivalence to Johnson & Johnson's Concerta, a drug used to treat attention deficit hyperactivity disorder.

Cipla’s approach towards Kremers Urban has been termed as extremely measured by market experts, particularly given that there is no fixed time frame by which it has to be closed. "It will also test how much more is Cipla willing to go to build a strong base in the US," a sector analyst said.

Over the last three years, Cipla, under a refurbished management structure, has worked on establishing its own front-end marketing presence in several of its high growth markets including the US. The company is on the road to recovery after a lull of last few years. The company's net profit rose to Rs 671 crore in the quarter to June 2015 from Rs 295 crore a year-ago.

Total sales were at Rs 3,853 crore, a 46% jump from Rs 2,720 crore. The current numbers are also the reflection of Cipla's subsidiaries that got incorporated in the company. The one-time payment over the manufacturing deal with Isreal's Teva for the heart burn drug Nexium has also helped Cipla pump up its revenues.

Its US operations are being run by Timothy Crew, who is an ex-Teva hand. Kremers is expected to give Cipla an ideal jumpstart in the increasingly competitive US specialty generics market where large Indian rivals like Sun PharmaBSE -0.71 % and Dr. Reddy's are already deeply embedded.

Cipla has aggressively expanded its operations in the last 18 months, setting up front-ends in more than 15 markets outside its home turf India. Some of those include Yemen, Sri Lanka, Uganda, Morocco, Algeria, the US and a few European nations.

Cipla COO, Sudhanshu Priyadarshi, on company’s first quarter earnings said, "Overall, the outlook for full-year 2015-16 is strong. And we expect to have a growth rate of approximately 20% for the year. We are evaluating reinvestment options in R&D, consumer healthcare and biologics, while at the same time maintaining Cipla's high standards of quality, affordability and safety."

In response to questions from the Economic Times, a Cipla spokesperson said that the company does not comment on any product or partner discussions.

"As a pharmaceutical company, we are constantly in discussions with multiple parties on potential collaboration opportunities - in line with our aspiration to drive access and ensure availability of high quality, affordable medicines," the statement read.