Street is cautious as Mallinckrodt biz is declining amid enhanced scrutiny on opioid drugs
Share Market News » Even as Hyderabad-based drug major Aurobindo Pharma is gearing up to acquire UK-based Mallinckrodt's speciality generics business in the US for an estimated $800 million (one of the largest outbound buys by a homegrown pharma firm), the street is cautious as it is a declining business, and lot depends on Aurobindo's ability to turn it around.
The homegrown drug major has already approached bankers to raise debt to clinch the deal which is likely to be signed within this month, said sources close to the development. An email sent to Aurobindo, however, did not receive any immediate response. The company's stock was down 0.95 per cent to Rs 617.25 a piece on BSE.
Mallinckrodt has a diverse portfolio of medicinal controlled substances and what makes it a lucrative target is it received over 30 per cent of the US Drug Enforcement Administration (DEA) quota for manufacturing controlled substances in the US last year. A controlled substance is generally a drug or chemical whose manufacture, possession, or use is regulated by a government. The entry barrier in this segment is thus quite high.
A source who is tracking the deal closely said, "The best part of the deal this deal enables Aurobindo break the entry barrier (the manufacturing quota etc) for a niche portfolio that would have taken them 10 years to achieve organically." The deal will include two manufacturing facilities.
Controlled substances constitute around 5 per cent of Aurobindo's US revenues at present, and some think that the acquisition is a strategic fit to grow the same line of business. The controlled substances business in US generates an Ebitda of $40 million for Aurobindo, sources revealed.
Meanwhile, Trump administration's crackdown on opioid addition has led to increased scrutiny of drugmakers who handle such a portfolio.
The homegrown drug major has already approached bankers to raise debt to clinch the deal which is likely to be signed within this month, said sources close to the development. An email sent to Aurobindo, however, did not receive any immediate response. The company's stock was down 0.95 per cent to Rs 617.25 a piece on BSE.
Mallinckrodt has a diverse portfolio of medicinal controlled substances and what makes it a lucrative target is it received over 30 per cent of the US Drug Enforcement Administration (DEA) quota for manufacturing controlled substances in the US last year. A controlled substance is generally a drug or chemical whose manufacture, possession, or use is regulated by a government. The entry barrier in this segment is thus quite high.
A source who is tracking the deal closely said, "The best part of the deal this deal enables Aurobindo break the entry barrier (the manufacturing quota etc) for a niche portfolio that would have taken them 10 years to achieve organically." The deal will include two manufacturing facilities.
Controlled substances constitute around 5 per cent of Aurobindo's US revenues at present, and some think that the acquisition is a strategic fit to grow the same line of business. The controlled substances business in US generates an Ebitda of $40 million for Aurobindo, sources revealed.
Meanwhile, Trump administration's crackdown on opioid addition has led to increased scrutiny of drugmakers who handle such a portfolio.
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