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Lupin to buy US-based Gavis Pharmaceuticals for $880 mn

Drug major Lupin Thursday said it is acquiring US-based Gavis for USD 880 million (over Rs 5,610 crore) to consolidate presence in the world's largest pharmaceuticals market.

New Delhi: Lupin, India's third-largest drugmaker by sales, will buy US-based Gavis Pharmaceuticals for USD 880 million (Rs 5,610 crore) - its largest acquisition as the company looks to expand in the US generics market.

The acquisition will help Lupin increase presence in the US, its largest market where sales fell 31 percent to USD 180 million in the first quarter.

Lupin said the acquisition - largest by an Indian pharma firm in the US - of closely held Gavis will give it access to 66 generic drugs as well as broaden its "pipeline in dermatology, controlled substance products and other high- value and niche generics".

Gavis will contribute to Lupin's earnings in the first full year after purchase.

Lupin shares dropped the most in three months on the BSE after missing earning estimates for the April-June quarter. Shares closed 5.3 percent lower at Rs 1,728.25.

The company has entered into a "definitive agreement to acquire privately held GAVIS Pharmaceuticals LLC and Novel Laboratories Inc (GAVIS), subject to certain closing conditions, in a transaction valued at USD 880 million, cash free and debt free", Lupin said in a statement.

The transaction has been unanimously approved by the boards of directors of Lupin and Gavis, it added.

Lupin Ltd Chief Executive Officer Vinita Gupta said: "This is a pivotal acquisition for Lupin as it aligns with our goal to expand and deepen our US presence.

"We are confident that Lupin's proven commercialisation capabilities, vertically integrated manufacturing operations and supply chain strengths will accelerate Gavis's growth."

Gavis brings a highly skilled US based R&D organisation which would complement Lupin's Coral Springs, Florida, inhalation R&D center.

Gavis's New Jersey based manufacturing facility will become Lupin's first manufacturing site in the US, it added.

"This is a time of globalisation for the specialty pharmaceutical industry... I am confident that the combined entity will be a powerhouse in the US specialty space and will significantly enhance Lupin's US platform," Gavis Founder and CEO Veerappan Subramanian said.

New Jersey based GAVIS is a privately held company specialising in formulation development, manufacturing, packaging, sales, marketing, and distribution of pharmaceuticals products.

Terming the acquisition as "landmark" for the company, Gupta said it will add tremendous value to its generics business in the US.

"It is a landmark acquisition for us. It will boost our existing business as well going ahead. It brings us manufacturing and R&D capabilities in the US. Gavis has tremendous pipeline for the US and we expect its revenues to grow three times by 2018," Gupta said in a conference call.

Gavis posted sales of USD 96 million in 2013-14.

Due to the acquisition, the Mumbai-based firm would also get an access to manufacturing facility in the US, she added.

"We have commercial and R&D base in the US but we did not have manufacturing presence in the country. So we could not participate in the government business as they require local manufacturing. Also you need to manufacture locally to get into controlled substances segment," Gupta said.

"Now with this acquisition we will be able to participate in these channels," she said.

When asked about the timeframe for the completion of the deal, Gupta said: "We expect to complete the deal in the third quarter subject to regulatory clearances."

She added that the company would continue to look at opportunities across the globe including the US and Europe.

"We need to add to our brand business in the US. So we will keep looking at opportunities in that market," she added.

Commenting on the recent inspection by the USFDA of its Goa plant and issuance of Form 483, company officials said the nine observations made by the US health regulator after the inspection were 'fairly routine'.

"The plant was inspected last month and the nine observations by the FDA did not include issues like data integrity. We have already complied with the observations and responded to the observations," a company official said.

The USFDA has raised nine concerns relating to manufacturing process and quality control. The Goa plant supplies drugs to markets in US, Europe and Japan.