New Delhi: Alkem Laboratories Ltd, India’s fifth-largest branded pharmaceutical company, has joined the race to JB Chemicals and Pharmaceuticals as KKR and Co look to cash out of the 48-year-old company due to a significant increase in market value. , people with knowledge of the matter said.
The matter coincides with Torrent Pharmaceuticals, India’s fifth-largest drugmaker, pulling out of talks over valuation differences, the people said. Torrent was seen as the frontrunner for a potential $3 billion buyout of the Mumbai-based company. Other suitors such as EQT are also said to be eyeing the target’s rising share price. Torrent can restart the discussion if the evaluation drops.
Ahmedabad-based Torrent was in active talks with global banks to finance a potential deal after missing out on Cipla and Biogran, France’s largest generics company. However, earlier this week, Torrent’s management told lenders that it was putting talks with KKR on hold.
JB Chemicals on Thursday traded at Rs. Ended with a market capitalization of Rs 29,192.24 crore, its share has grown 16 percent since the start of the year. Alkem has a market capitalization of Rs. 75,880.73 crore while Torrent Pharma’s market capitalization is Rs. 1.17 lakh crores.
Alchem’s Biggest M&A
Alchem, KKR and Torrent declined to comment. Alchem MD Sandeep Singh did not respond to queries.
If successful, this would be Alkem’s largest M&A to date and potentially move it to fourth place, replacing Mankind, in the domestic formulation market. It will further strengthen Alchem’s presence in the chronic segment, which accounts for 18 percent of revenue, while for JB Chem, it is almost half.
The 52-year-old professionally run Alchem is overseen by Sandeep and Anirudh, the third generation of the Singh family. The promoters hold 56.38 per cent of the company among various family groups.
For more than 15 years, Alchem has defended the No. 1 position in Anti-Infectives by successfully tapping into the largest sub-therapy area i.e. Anti-Bacterial. At the same time, GI and VMN have seen growth in the company. The company has gradually diversified its revenue base into chronic/semi-chronic therapies such as neuro/CNS, derma, cardiac and anti-diabetic while maintaining its core strength in its core therapeutic areas – anti-infectives, gastro-intestinal (GI) , vitamins and minerals (VMN), and pain; which accounts for 75 percent of its branded sales.
Under its new CEO, Vikas Gupta, a former Cipla executive, the company has identified several key areas for growth – strengthening market share in chronic therapies with a focus on anti-diabetic, neurology, dermatology, CNS and respiratory; Improving coverage among specialist doctors as well as targeting Tier II to IV cities and improving digitization of operations.
“We are looking at opportunities coming to the table,” Gupta said in the company’s earnings call last month. “We’re really looking forward to any acquisitions that we can make that add value to our overall scheme of things and that are more strategic. in nature.”
According to JP Morgan’s Bansi Desai, Alchem’s margin improvement will be primarily due to improvements in product mix, operational efficiency and higher medical rep productivity. “The company has identified med-tech as a strategic engagement,” he said. It has already tied up with US medical device company Exactech following an in-licensing agreement for hip and knee replacement implants to leverage its leadership position in the orthopedics segment.
However, analysts believe Alchem may need to partner with a PE fund to finance such a large transaction. By June 30, 2024 Alchem Labs has Rs. 3845 crores in net cash. By March 31, 2024, a total of Rs. 1418 crores of debt.
But as some members of the promoters group monetized part of their holdings in the company through a block trade between June-August this year, speculation of a promoter sale is rife. Adding to the rumblings were some sections of the family expressing their desire to migrate abroad. Those plans did not materialize and they returned to the country.
Alok Dalal of Jefferies said, “The new management plans to drive profitable growth in India, emerging markets and CDMO businesses. Biologics is another growth area identified by management that sees growth in emerging markets and India.
KKR’s investment arm, TAU Investments, currently owns 53.78 percent of JB Chemicals. The acquisition will trigger an open offer for another 26 percent as it will lead to a change in control, which means the new owner will get Rs. 26,202 crore ($3.11 billion) could be paid. KKR had in July 2020 received around Rs. 3,100 crore or Rs. 745 per share was acquired. JB Chemicals traded on the BSE on Thursday at Rs. 1,875/share was closed.
JB Chem offers a healthy cocktail of strong domestic franchisees as well as specialized Contract Manufacturing Organizations (CMOs) aside from exports. The company has some star brands like Nicardia, Metrogil, Silacar and Rantec and has also scooped up Novartis’ heart failure drug brand Azmarda.
After the acquisition, KKR appointed Cipla veteran Nikhil Chopra as JB’s chief executive in October 2020. He put the Mumbai-based drugmaker on a fast growth path, making four acquisitions in the last four years and investing $200 million, along with new go-to-market strategies including therapy diversification, increased productivity of medical reps, optimizing costs, mass manufacturing. Brands also large, and chronic therapy.
