Drugmaker Lupin Ltd has formalised an agreement to sell its entire stake in its Japanese subsidiary Kyowa Pharmaceutical Industry Co Ltd to Unison, a private equity fund in Japan, for an estimated ₹3,702 crore.

Outlining the details, Lupin said its subsidiary Nanomi BV will divest its entire stake (99.82 per cent) in Kyowa to Unison’s entity Plutus Ltd for an enterprise value of ¥57,361 million, subject to closing adjustments. The divested business recorded revenues of ¥14,241 million in the first six months of this fiscal, compared to ¥28,335 million in the previous-year period.

Early mover

Lupin, which had invested in Kyowa in 2007, had been among the early movers in the Japanese market, a significant but tough market for the industry to navigate given its stringent regulatory standards, despite Tokyo’s increasing orientation towards generically similar drugs. Of late, Lupin has been streamlining its operations, including in research.

Lupin Chief Executive Vinita Gupta said the latest transaction is aligned with its vision to focus on key markets and strategic priorities to achieve sustainable growth in the mid- to long-term. “The deal proceeds will be utilised to strengthen Lupin’s balance-sheet as well as provide growth capital to support organic and inorganic initiatives for our focus markets,” she said.

Explaining the post-transaction impact on the consolidated balance-sheet, Lupin said, its net debt would stand at ₹1,129 crore, compared to ₹4,361 crore, as on September 30, 2019. Its net debt-to-equity ratio would improve to 0.08 (0.32).

The proposed transaction values will generate post-tax net cash inflow of approximately ¥32,596 million, or ₹2,103 crore, the company said. Just last week, the company top-brass had told media persons, while announcing its quarterly financial performance, that it would not comment on “rumours” of a stake sale in its Japanese subsidiary, despite the market buzz.

Generic business

Lupin MD Nilesh Gupta said: “Driven by the incentives provided by the Japanese government to increase generic utilisation and our R&D, manufacturing and commercial strengths, we grew the Kyowa business multifold in the last 12 years to emerge as the fifth largest generic company in Japan.”

Lupin remained committed to advancing its complex generics, biosimilars and specialty portfolio globally, including in Japan, he added.

Market watchers had been anticipating this development ever since Lupin said in August that it would divest its Japanese injectables business and related assets in that country through its Japanese subsidiary Kyowa Pharmaceutical Industry to neo ALA Co Ltd, a wholly-owned subsidiary of Neopharma group, the UAE’s largest pharmaceutical manufacturer.

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