Pharma Major Lupin Limited (Lupin) announced that its Japanese subsidiary Kyowa Pharmaceutical has entered into a strategic asset purchase agreement with Shionogi & Co.
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Kyowa Pharmaceutical is a pharmaceutical company developing and manufacturing Branded & Generic pharmaceutical products for patients in the Japanese Market. With sales of JPY 25 billion for the fiscal year ended March 2016, Kyowa is amongst the fastest growing pharmaceutical companies in Japan, a market leader in the Central Nervous System — Neurology space and has strong presence in Cardiovascular, Gastroenterology and Injectables therapy segments.
The deal involves Transfer of Marketing and Manufacturing Rights for 21 of Shionogi’s Long-listed Drugs. The 21 products cover therapy areas such as Central Nervous System (CNS), Oncology, Cardiovascular and Antiinfectives. These 21 products had sales of JPY 9,400 million (USD 90 million) collectively on NHI price basis and Lupin would pay JPY 15.4 billion (USD 150 million).
Commenting on the acquisition, Mr. Nilesh Gupta, Managing Director of Lupin Limited said, “This acquisition marks Lupin’s foray into the Japanese Branded market in-line with our aspirations to build and strengthen our specialty business globally. The new Branded product portfolio has a strong fit with Lupin’s Kyowa business, as it adds depth and reach to its current CNS portfolio and other therapy areas.”
Under the agreement, Kyowa will book sales of the 21 products after 1st December, 2016. The manufacturing rights will be transferred from Shionogi to Kyowa in a sequential order after fiscal year 2017 ending 31 March, 2018.
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Dr. Isao Teshirogi, President & CEO of Shionogi said: “In the Japanese domestic prescription pharmaceutical market, the core mission of drug discovery-based pharmaceutical companies, such as Shionogi, is to create high-quality new drugs and to make them available to patients. Therefore, I’m very pleased that this agreement with Kyowa could make both aspects of our mission a reality, allowing us to pursue innovative drug discovery with an even more intense focus, while ensuring that our high quality long-listed drugs continue to be delivered to patients to meet their unmet needs.”
This sale comes on the back of Shionogi’s Medium-Term Business Plan, Shionogi Growth Strategy 2020 (SGS2020), in April 2014, with the vision of growing globally as a drug discovery-based pharmaceutical company. The Company is focusing its resources on its core therapeutic and marketing areas, while continuing to create innovative medicines to support future growth and to strengthen its business operations.
Shionogi & Co. is a major research-driven pharmaceutical company. Shionogi’s research and development currently targets two therapeutic areas: infectious diseases and pain/CNS disorders. In addition to its in-house research activity, Shionogi also accesses external innovation through collaborations with partners in both the academic and private sectors.
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What to watch our for? Well, Lupin is scheduled to report its first quarter performance on 9-Aug i.e. the next Tuesday and it would be interesting to see the company’s performance and see what the management has to say about this portfolio acquisition and the FDA concerns relate to the Goa plant (the company has almost completed the production transfer of products to its other plants).
Looks like the stock has already accounted for this portfolio acquisition as it currently is trading down half a percent.
Disclosure: Analyst holds the stock as part of personal portfolio. Please assume we are biased.
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