Wockhardt’s buy to strengthen US market

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Lawsuits pertaining to Lindane may pose challenges

BL Research Bureau

The Morton Grove Pharmaceuticals acquisition, which has been reportedly struck at under $38 million, provides Wockhardt with an entry into the US generic market.

After being the first Indian company to get an Abbreviated New Drug Application (ANDA) nod in the US way back in 1995, Wockhardt has been relatively slow to expand its market there as compared to other geographies, and this acquisition might plug that gap. Of late, until 2005-06, US revenues contributed to less than 10 per cent of its sales, consistently reporting lower growth rates than Indian and European businesses. However, Wockhardt’s US business has seen significant ramp-up as it has got a record nine ANDA approvals in the last 8 months.

Morton portfolio

Morton Grove Pharmaceuticals specialises in liquid and inhaled forms of generic drugs and has a portfolio of 31 products, 13 of which occupy the No 1 market position, according to the company. Morton Grove will also boost the company’s US revenue by providing a complete range of dosage forms right from tablets, capsules, liquids to injectibles.

It also has over 10 generic drug applications under regulatory review and over 30 oral liquid, topical liquid and prescription nasal spray products in the pipeline. Wockhardt could benefit from them as they enter the market in the coming years with innovator’s patents expiring.

Lindane issue

However, one third of Morton Grove’s revenues come from the branded Lindane range of dermatological products. Lindane, a synthetic chemical initially developed as an agricultural insecticide and then formulated for medical use due to its antiparasitic efficacy against scabies and lice, could remain a weak point for Morton Grove and indirectly, Wockhardt. There have been several lawsuits filed against the company pertaining to Lindane and it remains to be seen whether these pose challenges to the new Indian owners.

This acquisition apart, Wockhardt reported 69 per cent jump in consolidated sales at Rs 738 crore for the September quarter, as revenues from newly acquired companies in France (Negma) and Ireland (Pinewood) kicked in.

The operating margin showed an increase of 230 basis points to 24.5 per cent for the third quarter ended September 30. International operations are important for Wockhardt as it earns close to 2/3rd of its revenues from them. On the domestic front too, the company’s sales showed a growth of 20 per cent this quarter.

(This article was published in the Business Line print edition dated October 25, 2007)
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