Pharmaceuticals manufacturing (Photographer: Dhiraj Singh/Bloomberg)

Strides To Merge Business With Apotex To Create Australia’s No. 1 Generics Drugmaker

Strides Shasun Ltd. said it’s merging its Australian business with local operations of Apotex Inc to create the largest generics drugmaker in that country.

The Bengaluru-based company, which operates under the Arrow brand in Australia, will have a controlling interest in the merged entity, it said in an exchange filing. The transaction will be earnings accretive for Strides Shasun from the first year itself, it said.

The share-swap ratio of the deal, which is subject to regulatory approvals, will be announced once it is closed. Apotex’s hospital business won’t be part of the merger.

The Australian generics pharma market is valued at close to $1.1 billion and is dominated by four players — Strides, Apotex, Mylan and Sandoz. At 35 percent, Australia contributes the most to Strides’ revenue. After the merger, the combined entity will have a market share of 54 percent with nearly 3,200 first-line pharmacy accounts, making it the largest by volume and value.

Also Read: Drugmaker Strides Eyes Sale as Endgame After Business Ramps Up

The merger will provide better bargaining power to the merged entity given that three large wholesalers cater to the bulk of the generics market in Australia, Param Desai of Elara Capital said in a note. Strides can achieve cost-efficiency by transferring product manufacturing to India to improve margins, he said. “Growth in regulated markets like the U.S. and Australia is critical for the company’s stock performance.”

Strides gets the remainder of its business from the U.S. (25 percent), emerging markets and institutional business. It’s focusing on Australia and the U.S. to hedge against headwinds in the institutional sales. The company generates about $160-170 million revenue with operating margins of 18-20 percent in Australia, according to its filings.

The merged entity will continue to provide all Arrow and Apotex brands “that our customers have come to know and trust, and further enhance our customer service and continuity of supply, to better help pharmacists grow their businesses”, Dennis Bastas, executive chairman of Arrow, said in a statement filed with exchanges.

Roger Millichamp, chief executive officer at Apotex Australia, said, “The proposed merger will take the best of both companies, optimize our shared cost base, and maintain the viability of our operations through the more effective delivery of medicines and services to consumers and patients.”

Also Read: Generic-Drug Firms Said to Face U.S. Price-Fixing Charges

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