Going for leadership status

The two-part agreement includes U.S., Swedish and Indian operations, thus enhancing Recipharm’s reach and scale. The expanded position provides strong new development capabilities, an enhanced technology base and a broadly expanded customer portfolio, according to Recipharm.

The first acquisition is the $85-million purchase of Kemwell’s operations in both the United States and Sweden. The seller, Kemfin Holdings Private Ltd., will become a significant shareholder in Recipharm following the deal. This transaction is expected to be finalized during the second quarter of 2016, pending review and approval by the Swedish Competition Authority.

Kemwell’s U.S. operations are located in Research Triangle Park, N.C., with 50 employees producing for 120 customers. Services include development of inhalation, liquid, semisolid, solid and parenteral products, with an emphasis on early formulation and analytical methods and testing.

The Swedish entity, employing 210 people, is located in Uppsala and consists of two production units, including a fully integrated primary and secondary manufacturing facility producing a limited portfolio primarily for export.

The second piece of the Kemwell acquisition centers on their Indian operation, which employs some 1,400 people. The facility in India offers development services and commercial manufacturing of solid, semisolid, liquid and topical dose products. That facility purchase, valued at $120 million, is pending governmental approval in India, but completion of the deal is expected by the end of the year.

Thomas Eldered, CEO of Recipharm, said, “These transactions represent a significant step in both the consolidation of the CDMO industry and the transformation of Recipharm into a global leader ... [Once complete], Recipharm’s customers will have access to cost-effective development and manufacturing capabilities able to serve the international markets.”

According to a Recipharm spokesperson, the two-part transaction will result in multiple benefits for the combined enterprise, one of them being improved market access—the U.S. platform is reportedly now able to penetrate the largest and most innovative pharmaceutical market, and this means significant added potential to capture lucrative development projects in the United States and India, as well as conversion opportunities for existing projects.

The spokesperson also pointed to enhanced customer relationships as another benefit, as the acquisitions “introduce a top-tier customer base including Big Pharma and global generics” and “adds several high potential partnerships, especially in the U.S. and India.”

In addition, the expanded business means higher-quality technology and capability, introducing “a competitive solids and oral liquids manufacture in India,” as well as adding European Medicines Agency and U.S. Food and Drug Administration approval capabilities to Indian manufacturing facilities, increasing the capability for new inhalation, nasal and transdermal delivery and adding clinical manufacturing to U.S. holdings.

Finally, the financials of the deal are said to be attractive, offering strong combined cash flow generation and substantial synergies that should result in cost savings; the acquisition is expected to be accretive to the 2016 earnings before interest, tax, depreciation and amortization margin and well in line with overall financial objectives.

The Kemwell deal will be complemented by the Recipharm purchase of a majority share in Indian contract manufacturing organization Nitin Lifesciences Ltd. Completed in April, the roughly $1-million purchase results in Recipharm holding a 74-percent stake in the Indian sterile injectibles company.

“This partnership represents a real opportunity to take Nitin Lifesciences to a new level. The combination allows both organizations to access a wider customer base and to gain important learning from each other,” commented M.M. Sobti, the founder of Nitin Lifesciences.

Nitin specializes in manufacturing liquid ampoules, liquid vials, sterile dry powder, multidose eye/ear drops and lyophilized vials for therapeutic areas including antibiotics, antimalarial, non-steroidal anti-inflammatory drugs, other anti-inflammatories and local anesthetics. Nitin technology is reportedly highly complementary to Kemwell capacity, especially in India, enhancing Recipharm’s overall scale, reach and profitability.

Together, Recipharm’s recent moves bolster its growth in developing territories and establishes its strategy to capitalize on emerging markets, the company says, adding that the increased exposure and direct entry into the rapidly expanding Indian market further fuels organic growth and earnings-per-share accretion.