September 4, 2015 / 3:37 AM / 2 years ago

Indian drugmaker Cipla pushes into U.S. with two deals

An employee works at the reception area of Cipla at its headquarters in Mumbai, India June 17, 2015.Danish Siddiqui

MUMBAI (Reuters) - Indian drugmaker Cipla Ltd (CIPL.NS) is set to buy two U.S. generics businesses in cash deals worth $550 million, it said on Friday, following rivals with a push to enhance its presence in the world's largest generics market.

India's fourth-largest drugmaker by sales will buy privately-held firms InvaGen Pharmaceuticals Inc and Exelan Pharmaceuticals Inc, gaining multiple products in the areas of anti-infectives, diabetes and central nervous system disorders.

The deal, Cipla's most significant acquisition since the buyout of South Africa's Medpro two years ago, marks a delayed effort to build manufacturing presence in the United States, where most peers have already invested heavily.

Lupin Ltd (LUPN.NS), India's third-largest drugmaker by sales, in July agreed to buy U.S. peer GAVIS Pharmaceuticals LLC for $880 million in its largest ever deal.

"The portfolio being bought is largely oral products, so I don't think the margins will be huge, but at least they have something to get them going in the U.S.," said Hemant Bakhru, analyst at investment bank UBS.

Most large Indian drugmakers are moving away from oral products to injectables and other complex generics that are more difficult to make and give higher margins.

But the U.S. push was welcomed in the market, where Cipla shares rose as much as 4 percent after the announcement, against a broader Mumbai market index .NSEI that fell nearly 2 percent.

Cipla has a bigger focus on emerging markets than its peers. It made headlines in 2001 by making anti-retroviral medicines to treat AIDS in Africa for under $1 per day and gets more than 80 percent of its revenue from markets including India and Brazil.

In recent months, it has sought to balance its geographical portfolio, and it said the U.S. deal was part of that strategy.

The United States makes up only about 8 percent of Cipla's sales. It expects that to grow to up to a fifth of its overall sales by 2020, Chief Executive Subhanu Saxena told Reuters in June.

As a result of Friday's deals, Cipla will get its first manufacturing plant in the United States, 32 products already on the market and 30 pipeline products set to be approved for sale over the next four years. UBS's Bakhru said he expected Cipla would be able to launch some of the drugs in the acquired portfolio by 2017 and 2018.

Barclays acted as financial advisor to Cipla on the deal. Jefferies advised InvaGen.

Additional reporting by Abhishek Vishnoi; Editing by Muralikumar Anantharaman and Stephen Coates

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