A promising deal: Laurus Labs acquisition of Richcore Lifesciences

BL Research Bureau

With the acquisition of a majority stake in Richcore Lifesciences (Richcore), pharmaceutical company Laurus Labs will be tapping into the fast-growing biosimilars and biotechnology market. Laurus Labs will be acquiring a 72.55 per cent stake in biotechnology company Richcore for around ₹247 crore entirely funded from internal accruals. The transaction is expected to be closed in three months.

According to pharma analysts, the deal is attractively priced given that it gives Laurus Labs access to the biotech space, and captive fermentation capacities, a large chunk of which will be commercialising next year.

Laurus Labs’ existing business divisions comprise generic APIs (active pharmaceutical ingredients), generic formulations, and contract development and manufacturing for global pharmaceutical companies. The addition of Richcore’s business will help Laurus Labs diversify its revenue base and engage in contract development and manufacturing of recombinant proteins. Richcore’s captive fermentation capacities will also provide backward integration.

More

Laurus Labs to buy 72.55% stake in Richcore Life Sciences

Richcore operates in three segments – manufacturing biotech ingredients for use in vaccines, insulin and other biologics; enzymes for health and nutrition and industry applications; and contract development and manufacturing of therapeutic proteins and biosimilars. Richcore’s existing fermentation plant at Bengaluru has a capacity of 10,750 litres. With the addition of the new plant, this capacity will multiply severalfold. The new plant with a capacity of 180,000 litres is expected to be operational by the fourth quarter of FY21.

According to Tushar Manudhane, Vice President - Institutional Research Analyst – Healthcare, Motilal Oswal Financial Services, the total revenue from the existing commercialised and the new plant will be ₹140 crore in FY22. To provide some perspective, for FY20 and half-year ended September 2020, Laurus Labs reported revenue of ₹2,832 crore and ₹2,113 crore respectively.

The new acquisition apart, Laurus Labs is also undergoing organic expansion. The company plans to spend ₹1,200 crore on capex in FY21 and FY22 put together, more than the ₹700 crore initially budgeted for. A large part of this will be spent on expanding the company’s existing capacities. Still, it will also go towards a new formulations plant in Hyderabad and another API manufacturing plant in Vizag in Andhra Pradesh.