Aurobindo to buy Sandoz's dermatology business in US for $1 bn

Aurobindo Pharma Ltd has agreed to buy Novartis AG’s dermatology and generic pills business in the United States, in deal worth as much as $1 billion, perhaps the biggest overseas acquisition by an Indian drug maker.

The Hyderabad-based company said in a statement on Thursday it will pay $900 million (about Rs6,470 crore) in cash for the acquisition of about 300 products, three manufacturing facilities in the US and Eon Labs Inc, a wholly owned unit of Sandoz Inc, which in turn is now owned by Novartis.
The proposed acquisition comprises dermatology business and a portfolio of oral solid products along with commercial and manufacturing infrastructure in the US.
The deal also involves potential performance-based payments of $100 million on products in the pipeline, Novartis said in a separate statement.
The transaction will position Aurobindo as the second largest dermatology player and the second largest generics company in the US by prescriptions.
The net sales of the acquired business were around $1.2 billion for the calendar year ended December 2017. 
The portfolio being divested generated sales of $0.6 billion in first half of 2018 for Sandoz. After expiration of certain in-licensed product contracts, and rationalisations of acquired products that will not negatively impact profitability (but before the impact of any potential FTC-led divestments) the portfolio is expected to generate over $0.9 billion in sales for the first 12 months after completion of the transaction for Aurobindo.
The acquisition will be on debt-free and cash-free basis and will be made through its wholly owned subsidiary.
"The acquisition announced today is in line with our strategy to grow and diversify our business in the US. Acquiring these businesses from Sandoz will allow us to further expand our product offering and to become a leading player in the generic dermatology market,’’ N Govindarajan, managing director of Aurobindo Pharma, said in a release issued on Thursday.
"We will be focused on leveraging our group's market leading vertically integrated and highly efficient manufacturing base to enhance the market position and medium-term profitability of the businesses we are acquiring," he said.
Aurobindo Pharma USA Inc and Sandoz will enter into a transitional services agreement to support the ongoing growth plans of the businesses being acquired by the Indian company.
Aurobindo Pharma Limited, a world-leading marketer and manufacturer of generic pharmaceuticals and active pharmaceutical ingredients, had earlier signed a definitive agreement to acquire from Apotex International Inc, its commercial operations and certain supporting infrastructure in five European countries.