The shot(s) heard ’round the world
Hikma expands its global injectables business through the acquisition of Baxter Healthcare’s Multi-Source injectables business
Sources close to the deal estimate that the new business will reap approximately $180 million in annual revenue for Hikma's U.S. business West-Ward Pharmaceuticals Corp. in 2010, and will enhance the scale and scope of Hikma's global injectables offerings.
The deal will also add a high-quality, complementary injectables portfolio that includes critical care products and DEA-controlled substances. The acquisition expands Hikma's marketplace clout, as it becomes the second-largest injectables supplier in the U.S. with a combined market share of more than 15 percent.
"The acquisition of Baxter's Multi-Source Injectables business is transformational," says Hikma CEO Said Darwazah in a prepared statement. "The acquisition doubles the size of our global injectables business and doubles our sales in the U.S. market, while further diversifying our global revenue base. Importantly, we still retain sufficient financial flexibility to acquire additional assets across our core businesses and geographies."
From the back-office perspective, Hikma and West-Ward also gain qualified and experienced operational and sales teams as well as manufacturing capacity and distribution capabilities.
"We believe Hikma saw significant opportunity in Baxter's U.S. generic injectables business based on its pipeline and its focus on increasing its presence in the U.S. generics market," says Philip Rackliffe, Baxter's Multi-Source business leader. "The injectables business will be integrated into West-Ward, the U.S. subsidiary of Hikma Pharmaceuticals."
The Multi-Source Injectables business comprises a comprehensive and complementary portfolio of 41 products in more than 150 dosage strengths and forms across 23 therapeutic areas. The business' product portfolio also includes several DEA controlled substances that complement Hikma's growing oncology product range and a portfolio of ANDAs that may be reactivated for future sales opportunities.
According to the companies, selling the injectables business not only met Baxter's current strategic objectives, but comes at a time when Hikma was in the market to enhance its capacity in that very same area.
"Baxter's growth strategy is to focus more on differentiated offerings derived from the company's expertise in enhanced packaging and formulation technologies, resulting in higher-margin products," explains Rackliffe. "Multi-Source's high-volume, but traditionally generic, product profile and value proposition are better aligned with a company seeking to increase its presence in the U.S. generics market. By becoming part of a generics-focused company, we believe the business and its employees will benefit from increased investments and new product opportunities."
He adds that the deal has been in the works for quite some time: "We have been in discussions with Hikma since earlier this year, though we can't provide specifics on this. We are working to ensure a seamless transition of our products and business operations," he says.
Hikma gets property, experienced people and state-of-the art equipment in the deal. The Multi-Source Injectables business includes a 372,000 square-foot manufacturing facility in Cherry Hill, N.J. The Cherry Hill facility is equipped with state-of-the-art technology for the manufacture of DEA-controlled substances. The facility has an experienced and well-trained employee base, a strong quality track record and a history of securing FDA approvals.
The business also includes Baxter's 100,000 square-foot warehouse and distribution center in Memphis, Tenn., that has been specifically designed to handle pharmaceutical products and DEA controlled substances.
Rackliffe further explains the benefits the acquisition provides: "The transaction includes the acquisition of assets and personnel associated with Baxter's U.S. generic injectables business, including the product portfolio of high-volume, commodity generic injectable products in vial and ampoule formats, along with the Cherry Hill manufacturing facility, Memphis warehouse and distribution center."
And, according the Rackliffe, approximately 740 employees come with the deal. These include staff in Cherry Hill and Memphis as well as in supportive roles, such as field sales and supply chain, around the United States.
"Employees who are dedicated to the business will transfer to employment with West-Ward Pharmaceutical Corp.," Rackliffe says. "Until the closing of the transaction, all active employees will retain their positions and we expect no immediate changes to the facilities or functions. As West-Ward integrates the team and product portfolio following the close, they may make changes as they see appropriate. We cannot speculate on West-Ward's long-term plans, but they have communicated plans to invest in the business over the next several years."
Michael Raya, CEO of West-Ward, welcomes the Baxter family members to the fold.
"The combination of our business with the Multi-Source Injectables operations is a major step forward for Hikma in the U.S. and globally," he says in a prepared statement. "The business has an impeccable reputation for quality and customer service and excellent long-term customer relationships that we will build upon. We look forward to welcoming this new group of talented employees into the Hikma organization."
The network-building accomplished over time by the Baxter unit also was seen as a significant plus to the Hikma organization. The parties pointed out that the Multi-Source Injectables business has excellent relationships with the leading group purchasing organizations. The business boasts a sales force of more than 20 sales professionals that is viewed by parties close to the deal as highly complementary to Hikma's existing injectables sales capabilities.
Going forward, it is expected that Hikma will review opportunities to introduce the business' product portfolio in Europe and across the Middle Eastern and North Africa region, leveraging its strong existing sales force and reputation in those markets.
West-Ward, the U.S. agent for and wholly owned subsidiary of Hikma Pharmaceuticals, is one of that country's top 15 generic prescription medication providers. The company provides pharmaceuticals to a growing number of chain stores, wholesalers, distributors, health systems and government agencies. Based in Eatontown, N.J., West-Ward has more than 50 years of manufacturing experience.
Hikma Pharmaceuticals is a fast-growing multinational group focused on developing, manufacturing and marketing a broad range of both branded and non-branded generic and in-licensed products. Hikma's operations are conducted through three businesses: "branded," "injectables" and "generics" based principally in the Middle East and North Africa region, where it is a market leader, the United States and Europe. In 2009, Hikma achieved revenues of $637 million and profit attributable to shareholders of $78 million.
Neither Hikma nor West-Ward responded to requests for comment on this story.