Financial Daily from THE HINDU group of publications
Friday, Oct 22, 2004
Financial Daily from THE HINDU group of publications Friday, Oct 22, 2004 |
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Pharmaceuticals Corporate - Announcements Nicholas Piramal not to sell Roche diagnostic products — To get $22 m for discontinuing the deal P.T. Jyothi Datta
Mumbai , Oct. 21 IT may not have come to a logical conclusion, but with a cool Rs 100 crore in the kitty, no one is complaining, it seems. Drug major Nicholas Piramal India Ltd said on Thursday that NPIL and Germany's Roche Diagnostics Gmbh have discontinued an agreement that allowed NPIL to sell Roche's diagnostic products in India. The two companies have "mutually agreed to discontinue the agreement in terms of which the company is exclusively distributing diagnostic and patient care products of Roche in India, from January 1, 2005, when Roche Diagnostics will take over the distribution," NPIL told the Bombay Stock Exchange. Roche Diagnostics will pay NPIL $22 million (Rs 100 crore) by January 2005 for discontinuation of the agreement, it added. "No, it is not a logical conclusion (to the deal). We had an agreement to sell till 2007 and it could have gone further on also if certain criteria were met. But this was really importing their products and selling it. So we have been in discussion and the deal was struck yesterday (Wednesday)," Mr Ajay Piramal, Chairman-NPIL, told Business Line. "But it has been a good contribution for us on bottom-line. It will add about Rs 100 crore to our bottom-line in the next three months," he pointed out. Given that the original distribution deal was inked in 1997, why did the two companies part ways? "Roche wanted to come in on their own. And we though that this made a good value proposition for us. It doesn't forbid us from going with other companies," he said. Elaborating on the long-term impact of the deal, he said, "The margins in this business were not very high, since we were importing. So, in terms of percentage our margins would actually go up. In this deal, we have taken the value of future profits today." Analysts tracking the segment agreed that NPIL had indeed struck a good deal, at the right time. As part of the deal, products such as those used in diabetes care, blood-glucose meters, some diagnostic equipment and reagents supplied to laboratories would go completely into the Roche fold, Mr Piramal said. Elaborating on the maze of agreements that NPIL has with Roche, he said: "We have several agreements with Roche. And the only one remaining is for certain products that we manufacture and sell in India, such as Vallium, Bactrim and Supradyn. In fact that term has been extended by more than 15 years to 2028."
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