Indian pharmaceutical company Strides Arcolab has entered into a joint venture with a Brazilian company, BioChimico Industria Farmaceutica, to jointly market drugs for the hospital market. Strides will make the investment through an overseas subsidiary, Agila Specialities. The company owns a manufacturing facility in Campos, Brazil, which it acquired from South Africa’s Aspen Pharmacare, about a year ago, when the two companies restructured their business operations.
Strides had agreed to pay about $75 million or about Rs 340 crore to Aspen to acquire this plant, which makes a class of drugs known as penems and penicillins, a class of anti-infectives. At that time, Strides had indicated that it expects to earn about $40 million in revenues annually from this facility. The facility would be used to supply these products, under various worldwide supply arrangements of Strides. Significantly, the intellectual property of these products too will be transferred to the JV.
Agila will own 52% in the new JV with BioChimico owning the rest, but details of investments have not been disclosed. Since this is a marketing JV, capital investments will be low, with working capital being the main investment needed. The investments by Agila, will also depend on the value of the IP being transferred by both companies, and the fact that Agila has a majority stake in the venture.
Agila will make and supply high end injectables, at Campos, to this joint venture, while BioChimico will supply anaesthetic products from its facilities in Rio di Janeiro. Both products are sold to the hospital segment; combining forces will allow them to benefit from scale economies, lower marketing costs and perhaps, even marketing leverage. The products of both companies do not overlap.
Strides has been active on the M&A front, having recently acquired Inbiopro Solutions for Rs 65 crore, a Bangalore-based firm, marking its entry into the biologics space. It is also increasing its stake to 100% in a listed Australian company, where it owns a majority stake. The company had recently raised about $100 million through a qualified institutional placement. The Brazilian JV may not need any significant amount of upfront investments.
In a joint statement, made by both companies, Arun Kumar, vice-chairman and CEO of Strides expects the JV to complement existing licensing and supply arrangements with Aspen. Christopher Gross expects the JV to yield scope and scale benefits, translating into sales and profit growth opportunities.