The Hindu Business Line : Simayla buy: Positive for Cadila

Cadila Healthcare’s 70 per cent stake buy in South Africa-based Simayla Pharmaceuticals gives it a larger presence, well spread marketing network and a product basket that is skewed towards the generic medicines catering to the chronic segment. The stock closed 2 per cent down in a weak market.

Simayla, a young company launched in January 2007, has 18 molecules figuring in the top 50 new product list, according to IMS. Before the Simayla buyout, Cadila’s South African operations were limited to marketing finished dosages through its foreign subsidiary Zydus Healthcare SA. Now, Cadila can leverage Simayla’ local sales force as well as strong pipeline to penetrate better into Africa’s largest drug market. The retention of the original promoter of Simayla, who is expected to head operations, is also a positive.

Growing generics

Simayla mainly competes in a market where the health costs of 80 per cent of the populace are funded by the public sector. Simayla attempts to price its products on the lower side of the generic reference prices, therefore reducing additional outlays for patients covered by health plans. With the South African Government focussing on generic medicines (to cut costs), Cadila estimates the generic market to grow at a compounded annual growth rate of 19 per cent to touch $1.29 billion – representing 30 per cent of the total drug market by 2011.

More launches

Cadila-Simayla plan to launch 50 drugs over the next three years in South Africa. These drugs will be made at Cadila’s manufacturing unit in Ahmedabad – giving it a low-cost advantage, translating into better margins. Simayla currently focuses on therapeutic areas such as cardiovascular, anti-infective, respiratory and women’s healthcare, which share synergies with Cadila’s product basket. Though Simayla’s expected 2008 revenues at 40.5 million rands (Rs 22.1 crore) are small compared with Cadila’s consolidated turnover of Rs 2,320 crore, the new association could augur well for the future.

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