Sweden’s Recipharm has boosted its position in global contract development and manufacturing operations (CDMO) with agreements to buy Kemwell’s businesses in Sweden, the US and India for a total sum of 1.7 billion Swedish kroner.  This latest move, just two months after paying €68 million for Italy’s Mitim, adds operational capabilities in the US and significantly expands the group's presence in emerging markets, particularly India’s fast-growing pharmaceuticals sector.

Recipharm CEO Thomas Eldered said the transactions represent a significant step in the consolidation of the CDMO industry and the company’s transformation into a global leader. “We now have a US footprint which we can use to further penetrate the world’s largest pharmaceutical market and the business in Sweden provides us with several opportunities for synergies, he commented, adding that, in India, Recipharm’s customers will have access to very cost-effective development and manufacturing capabilities serving international markets, including the US.

Recipharm will pay around 693 million Swedish kroner, or $85 million, for the US and Swedish businesses which are located in North Carolina and Uppsala, respectively. The acquisition of these operations is expected to close during the second quarter of 2016.

The US businesses include the development of inhalation, liquid, semi-solid, solid and parenteral products with an emphasis on early formulation work as well as developing analytical methods and testing. There is also a GMP suite allowing for expansion in manufacturing clinical trial material.

The Swedish business comprises two production units including a fully integrated primary and secondary manufacturing facility dedicated to a limited number of products, based on the same API and supplied essentially to one major customer. There is also a small general pharmaceutical manufacturing unit. More than 95% of the Swedish output is exported to over 60 countries, including the US and Japan.

The price for the Indian acquisition is 982 Swedish kroner, or $120 million. This purchase is conditional on government approvals and is expected to complete before year end. The agreement also includes a right of first negotiation to buy Kemwell’s Indian biopharma business which is not included in the transaction.

In India, the operations include development services and commercial manufacturing of solid, semi-solid, liquid and topical dose products. The solid dosage plant has approvals from the EU and the US Food and Drug Administration (FDA), among other regulatory bodies. The oral liquids plant specializes in automated high throughput large volume production, mainly for the Indian subcontinent.

Recipharm said the project pipeline and development business are expected to generate significant growth and margin expansion in the coming years.

The acquired businesses had 2015 preliminary net sales of around 745 million Swedish kroner, corresponding to 22% of Recipharm’s total net sales in 2015, and are expected to be accretive from 2016. Cost savings and synergies with the US and Swedish operations are expected to yield more than 25 million Swedish kroner per year when fully realized in the fourth quarter of 2017.

The purchases will be financed by available funds, existing credit facilities, a share issue in kind to the sellers and a proposed share issue of about 850 million Swedish kroner with preferential rights for existing shareholders.