Wockhardt to sell its domestic brand business to Dr Reddy

Dr Reddy and Wockhardt informed the bourses today that they have entered into a definitive agreement in which Dr Reddy would acquire select divisions of Wockhardt branded generics business in India and a few other international territories of Nepal, Sri Lanka, Bhutan and Maldives for a consideration of Rs 1,850 crore.

During the nine-month period ending on December 2019, the business being transferred had reported revenue of almost Rs 377 crore, which is 15 per cent of the consolidated revenue and the proposed divestment is nearly 3.8 times of the annualised revenue.

The business comprises of a portfolio of 62 brands in multiple therapy areas such as respiratory, neurology, VMS, dermatology, gastroenterology, pain and vaccines, which would transfer to Dr Reddy's along with related sales and marketing teams; as well as the manufacturing plant located in Baddi (Himachal Pradesh) with all the plant employees.

Wockhardt has been struggling since the last few years to revive its financial health. In the last three fiscal years, the company has posted net loss. Thus, one of the main reasons why the company specified to divest this business is strengthening the balance sheet.

Apart from this, the company said that this transaction will help in:

1) Adequate liquidity for a robust growth in the international operations and investments in biosimilars for US market.
2) Augment remaining significant domestic branded business portfolio of the company and refocus towards chronic segment with differentiated product portfolio.
3) Continue its ongoing research and development activities.
4) Necessary action for the completion of clinical trials of the company’s breakthrough NCE in the anti-infective space, duly approved by coveted QIDP Program of USFDA.

Besides, the management said in its exchange filing that “the intended sale of a business portfolio is in-line with the company's strategic plan to shift from acute therapeutic areas to more chronic business like anti-diabetes, CNS, etc and also to its niche antibiotic portfolio of NCEs.”

The sale of business undertaking is subject to approval of shareholders of the company and the lenders as well as other conditions precedent. Meanwhile, the transaction is expected to get completed by May 12, 2020.

With this announcement, the stock of Wockhardt reacted negatively and plunged nearly eight per cent to touch an intraday low of Rs 362 apiece. While Dr Reddy settled for the day on a positive note at Rs 3,205, up by nearly 0.5 per cent from its previous close.