Vivimed Labs is acquiring a drug-making facility in India, that comes with regulatory approval from the US Food and Drug Administration (US FDA), giving it acess to the US market. It will get two products as part of the deal and some outsourcing contracts that will give it access to quicker revenue streams. In the longer run, it plans to file to sell new drugs from this facility.
As per the mutli-pronged deal, Vivimed will acquire Actavis Pharma Manufacturing’s drug producing unit in Tamil Nadu. Additionally, ANDAs (Abbreviated New Drug Approvals) for two drugs Losartan and Donepezil will be transferred, meaning that Vivimed can begin selling these drugs in the U.S. Vivimed will also contract manufacture a few drugs for the Actavis group over a defined period. ANDAs are the approvals needed from the US FDA to sell drugs in the US market. Losartan is a drug used to treat hypertension (high blood pressure) and donepezil is prescribed for mild dementia associated with Alzheimer’s disease.
The gross acquisition value is Rs 122 crore. At present, Vivimed has substantial debt on its books. As of March 31, 2013, Vivimed’s net worth was Rs 509 crore while its total debt (long term and short term borrowings) was Rs 598 crore, giving a debt-equity ratio of 1.17 times. The cash on hand was only Rs 24 crore. Here is the link to the company’s latest financial statement.
These figures indicate that the company may end up stretching its balance-sheet for the acquisition. Vivimed has said the funding will be achieved via a combination of internal accruals and debt. Working capital from the Actavis group for the contract manufacturing agreement will also help in running the plant without incurring borrowing costs.
The sale of the unit by Actavis is part of a re-structuring that was begun after the latter was acquired by Watson Pharmaceuticals.
The unit has the capacity to produce 1.2 billion solid oral dosages each year. The US drug regulator renewed its approval for the unit in October 2011. What this means is that Vivimed could also use this unit to file for approvals to manufacture and market other drugs in the U.S. market in the future. In addition, Vivimed could expand manufacturing capacity, as the unit currently occupies 2 acres out of the 5 acres that it owns.
At 11:19 am, Vivimed’s stock was up Rs 5.05 or 5 per cent at Rs. 106.10, locked at the upper end of the circuit filter. The BSE Sensex was down by 48 points or 0.3% at 19,297.
The stock has been falling sharply in recent times. As per a report in the Business Standard, the stock has been trading at its lowest levels since March 2010 (link).
Read Vivimed’s press release here (link).
Actavis is currently planning to acquire another U.S. based company Warner Chilcott, that has global manufacturing operations and is focused on women’s healthcare, dermatology and urology. Find the related article here (link). Actavis Inc’ affiliate, Actavis Holding Asia B.V., is the parent company of Actavis Pharma Manufacturing.