KKR-JB Chemicals deal reflects the generics opportunity in Indian pharma

PT Jyothi Datta Mumbai | Updated on July 03, 2020 Published on July 03, 2020

The P-E firm is to pick up 54% stake in the drug major; deal size estimated at $500 m

Private equity firm KKR’s decision to take a controlling stake in JB Chemicals makes it the third such deal, in a little over two months.

Just days ago, global investment firm The Carlyle Group picked up 20 per cent stake in Piramal Pharma. The PE firm had agreed to pick up 74 per cent equity in SeQuent Scientific, the largest pure-play animal healthcare company, in May.

In the latest PE-pharma company deal, KKR said it had agreed to pick up about 54 per cent stake in JB Chem, one of India’s older drugmakers, for a reported consideration of about ₹3,100 crore. This was to be followed by an open offer to mop-up an additional 26 percent stake in the estimated ₹1,600 crore company, they said. The entire deal size is reportedly $500 million.

Strategic players

When marquee PE players pick up equity in India’s generic assets, it shows there is a global opportunity in generic drugs, Sujay Shetty, PwC’s Health Industries Leader, told BusinessLine.

“PE firms with dry gunpowder are always looking to invest. The opportunity has come along now as strategic players are being careful with their money during the pandemic, as they look to control efficiencies,” he said. Private equity has always been strong on pharmaceuticals in India. But as pharma companies and hospital networks sell to PE firms, healthcare-watchers caution that it could erode India’s health security in making medicines for its own citizens.

The Covid pandemic has shown the importance for countries to have their own manufacturing strength. And with generic drugs being shown to have positive outcomes in treating Covid, the case only becomes stronger for a manufacturing base.

“If the asset is in India, it does not matter who owns it,” Shetty said, adding that the local industry had many players who would be able to step up to the plate when needed.

KKR’s healthcare investments in India include Max Healthcare and Radiant Life Care, which collectively comprise the largest hospital network in North India, a note from them said. It had also invested in Gland Pharma.

Founded in 1976, JB Chem had in the past sold parts of its business to Dr Reddy’s Laboratories and Johnson and Johnson. But it was recently in the news as a key producer of heart-burn drug ranitidine, red-flagged by the US Food and Drug Administration over the presence of a carcinogenic contaminant.

JB Chem has in its fold, branded generic products and a contract manufacturing base with the ability to make injectables, creams, ointments and lozenges, among others.

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Published on July 03, 2020
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