Wockhardt Ltd shares plunged as much as 8% in intraday trade on Wednesday after the company announced that rival Dr Reddy’s Laboratories Ltd will acquire select divisions of its branded generics business in India and a few other international territories for Rs 1,850 crore.
Wockhardt shares closed the session at Rs 365 apiece, down 7.2%, after hitting the day’s low of Rs 361.65. Dr Reddy’s shares, meanwhile, closed marginally higher at Rs 3,201.25, up 0.31%.
Dr Reddy’s will acquire 62 brands under Wockhardt’s ambit in multiple therapy areas such as respiratory, neurology, VMS (vasomotor symptoms), dermatology, gastroenterology, pain and vaccines, while also taking over the related sales and marketing teams. Wockhardt’s manufacturing plant located in Baddi, Himachal Pradesh, along with all plant employees will also go to Dr Reddy’s.
Both Wockhardt and Dr Reddy’s have signed a definitive agreement in this regard, according to a statement issued on Wednesday. The transaction is likely to be closed in the first quarter of the financial year 2020-21.
The domestic branded generics business that Dr Reddy’s acquired from Wockhardt had revenue of Rs 594 crore in FY19 and Rs 377 crore for first nine months of FY20, according to the statement.
The acquisition will reportedly help Dr Reddy’s to jump two places to 12th position on rankings of Indian pharmaceutical market by sales, and will eventually help it to break into top 10.
“India is an important market for us and this acquisition will help in considerably scaling-up our domestic business,” said GV Prasad, co-chairman and managing director, Dr Reddy’s.
Meanwhile, for Wockhardt, the sale will significantly help in debt reduction, thereby strengthening the company’s balance sheet. The company’s long-term outstanding debt as of September 2019 stood at Rs 2,098 crore.
“The intended sale of the business portfolio is in line with the company’s strategic plan to shift from acute therapeutic areas to more chronic businesses like anti-diabetes, CNS (central nervous system) etc. and also to its niche antibiotic portfolio of NCEs (new chemical entities),” said Habil Khorakiwala, founder chairman, Wockhardt Group.
“The divestment will also ensure adequate liquidity to bring in robust growth in the chronic domestic branded business, international operations, investments in biosimilars for the US market apart from the company’s global clinical trials of breakthrough anti-infectives and R&D activities,” Khorakiwala added.