Cipla, the leading player in the global drug market announced that its subsidiary InvaGen had entered into formal agreement to acquire US-based specialty pharmaceutical company Avenue Therapeutics from Fortress Biotech for approximately $215 Mn (Rs. 15.6 Bn). The acquisition is anticipated to take place in two phases.
As stated by Cipla in a regulatory filing, at the closing of the first stage, InvaGen and its affiliates will acquire a 33.3% stake in Avenue Therapeutics’ capital stock, through the issuance of new shares by Avenue on a completely diluted basis for $35 Mn. This activity will involve 5,833,333 common stock shares at a price of $6 per share.
At the same time, with the closing of the issuance of stock, InvaGen and its affiliates will put forth the appointment of 3 members into the 7-member board of directors of Avenue Therapeutics, one of which will be independent. During this second stage activity, InvaGen will acquire the remaining shares of Avenue Therapeutics for a further $180 Mn in total, or $13.92 per share.
Avenue Therapeutics has so far been largely known for the development and commercialization of its proprietary intravenous (IV) painkiller, Tramadol.
The transaction will go through after a number of closing conditions including the approvals from the shareholders of Avenue Therapeutics and regulatory bodies are met satisfactorily. The deal will be financed with the help of a dollar based loan in the United States, putting Cipla on an even footing with industry counterparts such as Sun Pharma and Dr. Reddy’s who already have an established presence in the country.
Cipla, in its statement said that the closing of the second stage of acquisition will be subject to a number of conditions including US Food and Drug Adminsitration approval for labelling and scheduling along with the absence of restrictions such as Risk Evaluation and Mitigation Strategy on Avenue Therapeutics’ IV Tramadol medication.
A spokesperson from Cipla stated that the acquisition deal is anticipated to put Cipla squarely in the lucrative sector of specialty institutional businesses across therapeutic areas present in the US, and to build a dedicated distribution network in specialty products in the US market. The deal also puts Cipla in position to present solutions for the major problem of opioid abuse in the region.
Shares of Cipla were trading at a lower rate of approximately 0.69 per cent at Rs. 528.2 each at the Bombay Stock Exchange.