(Reuters) – India’s second-largest drugmaker by sales, Dr Reddy’s Laboratories Ltd, will buy some established brands of Belgian drugmaker UCB SA in South Asia for 8 billion rupees ($128.38 million), the company said on Wednesday.
As competition heats up, Indian drugmakers are looking to strengthen existing porfolios in fast-growing emerging markets, as well as at home.
The country’s largest drugmaker, Sun Pharmaceutical Industries Ltd, closed a deal to buy rival Ranbaxy Laboratories Ltd last month, strengthening its presence, particularly in emerging markets.
Dr Reddy’s said the acquisition of brands in India, Nepal, Sri Lanka and the Maldives, would help it win a bigger foothold in the areas of respiratory, dermatology and pediatrics drugs.
The acquired business generated revenue of about 1.5 billion rupees in 2014, Dr Reddy’s said.
The India part of the business employs about 350 people.
Some brokerege analysts, however, expressed concern about the acquisition cost, with the deal valuing the UCB business more than five times its sales, which, they said, was higher than the industry standard.
“You would demand this kind of valuation when you’re buying the leader in the industry. And I’m not sure if Dr Reddy’s has got leading brands from UCB,” said Nimish Mehta of Equirus Securities.
UCB Chief Operating Officer Mark McDade said in a statement the deal would allow the Belgian company to sharpen its focus on its neurology portfolio in India. Dr Reddy’s said it expected to close the deal in the first quarter of this financial year.
Last month, Reuters reported that Dr Reddy’s was in talks with UCB for a deal concerning the latter’s Indian operations, citing a source with direct knowledge of the matter. ($1=62.3150 Indian rupees) (Reporting by Zeba Siddiqui in Mumbai; Editing by Clarence Fernandez; Editing by Sumeet Chatterjee and Clarence Fernandez)