Cipla’s decision to acquire two US-based generic drug makers — InvaGen Pharmaceuticals Inc and Exelan Pharmaceuticals Inc — will benefit the former on three counts.

One, the acquisition will help Cipla widen its footprint in the US and boost the company’s revenues from this geography. InvaGen and Exelan reported combined revenue of $275 million (₹1,829 crore) for the 12-month period ended June 2015.

This is about 16 per cent of the Cipla’s consolidated revenues in 2014-15.

Second, given the healthy operating profit margin in the US, the acquisition is expected to margin accretive for Cipla, once completed.

The combined operating profit margin of InvaGen and Exelan is estimated to be around 20.6 per cent for the 12-month period ended June 2015.

This is higher than the 19 per cent operating margin reported by Cipla on a consolidated basis in 2014-15. Hence, the acquisition should rev up the company’s blended operating profit margin.

Finally, besides geographical expansion, the acquisition will also help the company diversify its product offering across therapeutic categories. InvaGen has a diversified pipeline of about 40 drugs used to treat ailments such as cardio-vascular, neurological disorders, diabetes and infection, which have been approved by the US Food and Drug Administration.

Of these, 32 products are currently sold in the market. It has a pipeline of 30 products, which are pending approval and likely be commercialised over the next four years.

InvaGen is the first generic filer for five products with a cumulative market size of $8 billion. The company should enjoy exclusive marketing right for six months; this can lift Cipla’s revenues and profit over the next three years. These acquisitions will give the company access to large capacity manufacturing base in Hauppauge, NY and Research and Development infrastructure in the US, which can be used to file other products for the US market.

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