Torrent Pharma Buys Unichem’s Domestic Branded Business For Rs 3,600 Crore

Torrent Pharma Ltd. acquired the domestic branded formulations business of Unichem Laboratories Ltd. for Rs 3,600 crore to become the country’s eighth largest drugmaker at a time when Indian companies face regulatory scrutiny in the U.S., one of their largest markets.

Torrent Pharma will take over the India and Nepal business of more than 120 brands, a manufacturing unit in Sikkim and all the employees engaged, it said in an exchange filing. The Ahmedabad-based company will fund the deal via internal accruals and debt. It helps Torrent, which gets two-thirds of its revenue from overseas, strengthen its local business as the acquired portfolio contributes 60 percent to Unichem’s domestic sales.

“The deal will strengthen Torrent’s cardio-vascular and central nervous system therapies where it’s already strong,” Amey Chalke, pharma analyst at HDFC Securities, said before the deal was announced. “Since the portfolio is old and not growing, we believe Torrent will only be able to add size with these products and earnings benefits are not likely for some years.”

Torrent’s focus on domestic business comes even as generic drugmakers face pricing pressure and competition in the U.S. Several of them face regulatory scrutiny over price-fixing and investigators have already named Mylan’s second-ranked executive.

The Mint newspaper first reported on the potential deal.

The acquisition will help Torrent Pharma increase its market share to 3.4 percent from 2.4 percent. It brings one Rs 200-crore brand and three of over Rs 50 crore each to Torrent’s existing portfolio, the company said. The top acquired brands include Losar, Unienzyme, Ampoxin, Telsar, Vizylac.

“The transaction is a strategic fit for Torrent and will strengthen its position in key segments of cardiology, diabetology, gastrointestinal and CNS therapies. It is also expected to realise cost and revenue synergies,” Samir Mehta, chairman of Torrent Pharma, said.

The revenue overlap of acquired business is low at 28 percent, mainly in the central nervous system therapies, Credit Suisse said in a report. The field force productivity will improve for Torrent and the deal offers cross-selling opportunities, it said.

Mumbai-based Unichem, ranked 24th in the Indian pharma market, has seen its growth slow down over the past five years due to a high exposure to slow-growing molecules. Sales picked up over the past two years after its hypertension medicine Losartan came off the list of drugs whose prices were capped under the National List of Essential Medicines.

Ahead of the announcement, shares of Torrent Pharma fell 0.76 percent to Rs 1,315.50 apiece while Unichem rose 0.59 percent to Rs 313.30 on the BSE.