Mylan Inc purchases Agila for $1.6bn

April 2013 | DEALFRONT | MERGERS & ACQUISITIONS

Financier Worldwide Magazine

Pharmaceutical manufacturer Mylan Inc has agreed to acquire Agila Specialties Private Limited, a producer of generic, injectable drugs, from Strides Arcolab Limited for $1.6bn. Mylan expects the deal to be completed in Q4 2013, subject to certain closing conditions. The transaction values Agila at eight times its reported revenues for 2012 and 24 times its earnings before interest, taxes, depreciation, and amortisation (EBITDA) for the same period. Mylan shares rose 3.6 percent to $29.61 after the purchase was announced.

Mylan, the world’s second-biggest generic drug maker, is acquiring Agila as it attempts to become one of the three biggest providers of injectable medicines in the world. Once completed the combined Mylan/Agila portfolio will represent 70 percent of the regulated market for injectables.

Mylan will utilise a $1bn unsecured bridging loan provided by Morgan Stanley to finance the deal. The company may also have to pay an additional $250m for Agila should certain conditions be met. “The addition of Agila to our existing injectables platform will immediately create a new, powerful global leader in this fast-growing, attractive market segment and accelerate our target of becoming a top-three global player in injectables,” said Mylan chief executive officer Heather Bresch in a statement announcing the deal. “The acquisition of this unique asset delivers on several of Mylan’s strategic growth drivers by further expanding and diversifying our product portfolio and geographic reach.”

Agila, based in Bangalore, India, operates nine manufacturing facilities globally, most notably in Poland, Brazil and India where the company also runs one of the largest sterile and lyophilisation capacities in the world. The absorption of Agila’s portfolio of products will boost Mylan’s range of injectables to around 500-700, with an additional 350 products awaiting approval globally. According to data from IMS Health, the injectables market is expected to grow at a compound annual growth rate of 13 percent per year to 2017. This rate of growth eclipses most other dosage forms.

Mylan will employ Agila’s existing manufacturing architecture to produce cheaper versions of its expensive biotechnology medicines, including insulin and blood-boosting treatments for the US market. Agila’s state-of-the-art facilities were one of the factors which differentiated the company from its competitors, according to Ms Bresch.

The acquisition of Agila is the third such purchase that Mylan has made in the injectables market, following its purchase of Merck KGaA’s injectables unit in 2007 and its acquisition of Irish firm Bioniche in 2010. Ms Bresch noted that one of the key drivers for the deal was that 80 percent of drug shortages in the US were a result of sterile injectables caused by significant lapses in manufacturing quality. According to Ms Bresch, Mylan intends to “step in with quality, reliable supply”. Agila specialises in domains such as oncolytics, penems, penicillin, cephalosporins and ophthalmics, and its products are available in over 70 different countries.

Agila has proven to be a successful unit for Strides, in a rapidly expanding sector. The firm reported sales of $255m for 2012 and EBITDA of $86m. Agila’s revenue also rose by 32.2 percent in 2012 while its EBITDA rose by 76 percent. The injectables division contributed 58 percent of sales and four-fifths of Strides’ EBITDA.

The acquisition of Agila will also include the purchase of the company’s overseas subsidiary Agila Specialties Asia Pte. “We believe Agila, its partners, customers and employees across all of its markets will benefit significantly from Mylan’s global reach and strong position in the global generic and specialty pharmaceutical sector,” said Arun Kumar, Strides’ executive vice chairman and group chief executive officer.

In its own press release announcing the deal, Strides said it would return $700m to $800m of pre-tax proceeds from the deal back to its own shareholders. Strides will also pay off the company’s outstanding debt. As of 30 June 2012, Strides had debt of $221m.

Venkat Iyer, chief executive officer of Agila, stated “This transaction is an endorsement of the world-class capabilities the Agila team has created and serves as a perfect bolt-on strategy for the future of Agila and its employees.”

Richard Summerfield