Mylan Inc., the world’s second-biggest stand-alone generic drugmaker, agreed to buy India’s Strides Arcolab Ltd.’s injectable drug unit Agila Specialties for $1.6 billion.
The cash deal will broaden Mylan’s portfolio with off-patent injectable medicines that are in high demand because of supply shortages in the U.S. Mylan wants to be among the top three global injectable drug companies, said Heather Bresch, chief executive officer of the Canonsburg, Pennsylvania-based company.
The deal will “immediately create a new, powerful global leader in this fast-growing, attractive market segment,” Bresch said in a statement announcing the agreement. The company said it will add to earnings immediately after closing.
The U.S. Food and Drug Administration listed more than 120 medicines as being in short supply as of Nov. 28, including the sedative injection propofol and the ovarian cancer treatment Doxil. The shortages are caused by manufacturing issues and decisions by companies to stop production of some generic therapies deemed no longer profitable.
In November, Strides received FDA approval for an oxaliplatin injection used to treat advanced cancer, which will be distributed in the U.S. by New York-based Pfizer Inc. The Agila unit also has partnerships with London-based GlaxoSmithKline Plc and Basel, Switzerland-based Novartis AG, according its website.
Agila, based in Bangalore, had the highest number of injectable-medicine approvals by the FDA for generic drugs, with 32 from 2008 to 2010, compared with 23 at Hospira Inc. of Lake Forest, Illinois, according to a May presentation. The company has eight manufacturing facilities in India, Brazil and Poland, according to its website.
The deal will boost Mylan’s portfolio of injectable drugs from 500 to 700, with another 350 awaiting approval around the world. The company projects the generic-drug market to grow at about 13 percent a year through 2017, and the deal will give it entry into new markets including Brazil.
“We believe that risks are well taken in that arena,” Bill Smead, chief executive officer of Seattle-based Smead Capital Management, said of Mylan’s plans. “They’re creating quite a powerhouse.” His fund owned 317,000 shares of Mylan as of December, according to filings.
Mylan shares rose 2.4 percent to $29.25 in extended trading Wednesday.
Started in 1990 by Arun Kumar and K.R. Ravishankar, Strides began manufacturing injectable drugs five years later and entered the U.S. market for sterile products in 2004. The business was renamed Agila in 2010 and reported earnings before interest, taxes, depreciation and amortization of 2.7 billion rupees in 2011, accounting for more than half of Strides earnings, according to a company presentation in May.
Mylan may pay Agila another $250 million based on certain conditions, the companies said, without detailing what those were. The deal is expected to close in the fourth quarter, the companies said.
Morgan Stanley is Mylan’s financial adviser, while Milford Skadden, Arps, Slate, Meagher & Flom LLC served as legal adviser.
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