Africa's Adcock Buys India Drug Assets for $86 Million
South African drugmaker Adcock Ingram is to buy a portfolio of about 60 medicines and a distribution network from India's Cosme Farma for $86 million to bulk up its presence in the country's $16 billion pharmaceutical market.
The all-cash deal will give South Africa's second-largest drugmaker distribution facilities in 27 Indian states and a range of drugs covering dermatology, gynaecology, gastro-intestinal and orthopaedic medicine.
Adcock, which has a wide offering of over-the-counter generic drugs, could also benefit from Delhi's $5.4 billion plan to provide free generic drugs to hundreds of millions of people.
"It good makes sense strategically but it looks like they paid a hefty fee for it, which is the premium you pay to get exposure to those high-growth opportunities in India," said Mathew Menezes a healthcare analyst at Avior Research in Johannesburg.
"This means they have to deliver on significant sales growth without compromising on margins in a competitive market like India."
Adcock's purchase price of 4.8 billion rupees ($86 million) represents a premium of nearly 13 times Cosme's earnings before interest, tax, depreciation and amortisation (EBITDA).
Privately held and family-owned, Cosme is a pan-Indian drugs company based in Goa with offices in Mumbai. It has a sales force with about 1,000 staff, making it a smaller player in India's vast market.
Adcock already runs a manufacturing plant in India, where the pharmaceutical market has been forecast to book a compound annual growth of 16% in the five years to 2016, according to IMS Health, a healthcare information company.
Johannesburg-based Adcock expects the deal to add about 250 million rand ($30 million) a year to its revenue, which currently stands at 4.5 billion rand, Deputy Chief Executive Andy Hall told Reuters.
Hall said Adcock was looking for other acquisitions in Africa. It already has a presence in Ghana and Kenya.
"We still have a couple of deals of similar scale in terms of size of operation, and in terms of revenue that we're looking at on the African continent," he said.
Adcock has been dwarfed by domestic rival Aspen Pharmacare , which has already made an aggressive push overseas.
Adcock, which aims to have 30% of its sales from outside its home market in about two years, has also been teaming up with global pharmaceuticals companies such as Merck & Co to co-distribute products in Africa.
