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Kumar Shankar Roy

It is not entirely unexpected that the promoters of Dabur Pharma have sold off their equity stake in the company to an overseas major. Global pharma biggies have been looking at acquiring niche products in high-margin therapeutic segments such as oncology. Dabur Pharma fits the bill, due to its vertically integrated structure and its exclusive focus on anti-cancer drugs.

The move also allows the Burmans of Dabur Pharma (who held 65.3 per cent of the equity in March 2008) to focus on their bread-and-butter FMCG business under Dabur India and its new retail foray. The company had already sold off the non-oncology formulations business to Alembic for Rs 159 crore in January 2007. The relatively smaller molecular business was also sold for Rs 2.25 crore in December 2007.

At this point, it is unclear as to who the major shareholders that are exiting Dabur Pharma along with the promoters. But given the size of equity which is changing hands, an open offer is likely to be triggered, if the acquisition clears regulatory hurdles. The new acquirer, Fresenius Kabi, will immediately get access to 40 oncology formulation brands and 25 bulk drug ingredients used for cancer drugs, besides Dabur Pharma’s two facilities in India and one in the UK.

An estimated $10 billion of anti-cancer drugs are slated to go off patent (allowing cheaper generic versions to be introduced) by 2010. Dabur also has invested significant sums over the years in research and development which gives it a good pipeline of over six anti-cancer drugs. Dabur Pharma had signed an agreement with Government Pharmaceutical Organization of Thailand for supplying the generic version of anti-cancer medicine Docetaxel, which may be of strategic importance.

Investors can expect a sharp gain in Dabur Pharma stock on Monday as the transaction has been inked at a price of Rs 76.50, at a near 11-per cent premium to the stock’s Friday close, valuing the company at around Rs 1,200 crore. Fresenius Kabi, a unit of German healthcare group Fresenius SE, is currently involved in infusion therapy and clinical nutrition in Europe and Latin America and in the Asia Pacific.

Dabur Pharma can provide synergies to the acquirer as the oncology company markets and also obtained marketing approvals for products in key Asia Pacific markets such as the Philippines, Malaysia, Vietnam, Myanmar and Jordan. Similarly, it has presence in Latin American countries such as Brazil, Colombia, Venezuela, and Mexico.

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