Mylan Laboratories Inc, the second-largest US generic drugmaker, will buy control of Matrix Laboratories Ltd for as much as US$736 million, the biggest acquisition of an Indian pharmaceuticals company.
Mylan will acquire 51.5 percent of Matrix from shareholders including Singapore's Temasek Holdings Pte and Newbridge Capital LLC at 306 rupees (US$6.60) per share, the companies said in a statement. Pennsylvania-based Mylan offered to buy a further 20 percent stake at the same price, a 10 percent premium to the stock's closing price in Mumbai on Friday.
Indian companies offer lower production costs and standards that meet US Food and Drug Administration approval to overseas drugmakers seeking to be more competitive. Generic drugs, or low-cost copies of brand-name treatments, form 50 percent of prescriptions in the US from 18 percent in 1984, Mylan said.
"There will definitely be a broadening of the market of Matrix and it will give more depth, reach and coverage for the company," said Viswanathan Vasudevan, who helps manage US$185 million at Aquarius Investment Advisors Pte in Singapore. Mylan will "get a base in a place like India where labor is cheap and use India as a base for distribution through Asia."
Shares of Matrix, India's seventh-biggest drug company by market value and based in Secunderabad, rose 3.3 rupees, or 1.2 percent, to 280.45 rupees at 10.36am local time on the Bombay Stock Exchange, having risen as much as 7.2 percent earlier.
Mylan will also buy shares from N. Prasad, Matrix's chairman. He will retain a 5 percent stake in Matrix after the transaction.
Matrix, which bought Belgium's Docpharma NV in July last year, expects the financial resources from Mylan will allow the company to increase manufacturing and product development and expand Docpharma's portfolio and presence across Europe. The company will also be able to increase sales of its AIDS drugs, it said in the statement on PR Newswire.
Mylan and Matrix together will have about 5,100 employees in 10 countries.
Founded in 1961, co-founder Milan Puskar is chairman of Mylan, which is the biggest maker of generic skin patches in the US. The company makes 140 generic products to treat diseases including angina and diabetes.
Buying a stake in Matrix will give Mylan access to emerging pharmaceutical markets including India, China and Africa as well as Europe, through Docpharma.
In South Africa, the Indian drugmaker has allied with Aspen Pharmacare Holdings Ltd, Africa's biggest maker of generic medicines, to supply ingredients to make AIDS drugs. Matrix said in April last year it was buying a 50 percent stake in Aspen's wholly owned unit, Fine Chemical Corp, in South Africa.
Matrix said in September last year it agreed to buy a 60 percent stake in China's MCHEM Pharma Group Ltd to broaden its supply of raw material used to make AIDS drugs.
The Indian company will also help Mylan get access to altered versions of existing drugs which cannot be easily copied.
Matrix will benefit from a strong presence in the US, the world's biggest drugs market, expansion of manufacturing capacity and expertise in product development.
Mylan is seeking to gain ground against the big generic drugmakers such as Teva and Novartis AG. Teva obtained rights to sell generic Zocor when it bought Miami-based Ivax Corp in January. Teva has spent almost US$11 billion to stay ahead of Swiss-based Novartis AG in the generic drug market and expand operations in the US, where it introduced seven drugs this year as of the first week of the month.