Strides sells stake in arm to Watson Pharma

  The Bangalore-based pharmaceutical major, Strides Arcolab, sold its 94 per cent stake in Ascent Pharmahealth, a subsidiary with operations in Australia and Southeast Asia, to the U.S.-based Watson Pharmaceuticals which also acquired the remaining 6 per cent stake associated with Dennis Bastas, CEO of Ascent, in a move to restructure and focus its business.

The cash offer from Watson values Ascent at an enterprise value of Australian $375 million ($392.5 million). Ascent is a top five generic pharmaceutical company in Australia and is present in countries across Southeast Asia.

Strides develops and manufactures a wide range of IP-led niche pharma products with an emphasis on sterile injectables. It has 13 manufacturing facilities across five countries and has a 350-scientist strong global R&D Centre in Bangalore.

Arun Kumar, Executive Vice-Chairman and Group CEO of Strides Arcolab, said, “The sale of Ascent is a value-enhancing and forward looking initiative for Strides. We have been clear about our intention to focus on our highly attractive steriles segment, which we expect to be our growth engine going forward. The transaction further facilitates the execution of this strategy and unlocks significant value for the Group. Furthermore, the proceeds from the transaction considerably strengthen our balance sheet.”

T. S. Rangan, Group CFO, Strides Arcolab, told this correspondent that the steriles business contributed around 40 per cent of the company's revenues and about 70 per cent of the operating earnings. “Although Ascent enjoys operating multiple of 20, the highest in industry, its sale will help us restructure our $500 million debt by allowing us to retire around $250 million and will give us some flexibility. Importantly, the saving on the interest paid to service the debt can compensate for the sale of the Ascent business,” he said, adding that all Ascent's 307 employees would be absorbed by Watson.

Watson is a specialty pharma company focussed on urology and women's health. Its President and CEO Paul Bisaro said the acquisition gave Watson a successful commercial structure in Australia and Southeast Asia and a broader product pipeline.

Strides' generic business spans Australasia, Africa and India. After Ascent's sale, Strides' medium-term plan is to grow the injectibles business to global scale through its specialities' division Agila Specialties.