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Novartis, Teva in race to acquire Aurobindo Pharma

Global giants Novartis and Teva are in the race to acquire a strategic stake in Aurobindo Pharma, reports Suprotip Ghosh.

india Updated: Feb 05, 2007 20:42 IST

Global giants Novartis and Teva are in the race to acquire a strategic stake in Aurobindo Pharma. According to sources close to the company, the Hyderabad-based manufacturer of oral and sterile antibiotics is in advanced stage of negotiations with the multinational pharma giants.

If either company acquires Aurobindo, they would be buying one of the strongest companies in the business of producing low-cost unbranded drugs in India. Aurobindo has 139 patents in US and the European Union. The company has posted sales of Rs 528.4 crore ending December 2006.

Novartis and Teva have stressed on the importance of India as a market, especially in the unbranded low-cost generic drugs business. Stock markets have also sensed the possibilities of a deal. The Aurobindo Pharma scrip has seen phenomenal activity in the last six months. The scrip, which was trading at a 52-week low on June 16, 2006 at Rs 467.9, posted a yearly high on January 17, at Rs 762.

This works out to an appreciation of 62.9 per cent over the last seven months. Aurobindo’s profits have increased from Rs 54.6 to Rs 60.12 in the last two quarters, incarease of 10.1 per cent. Earnings Per Share (EPS) though has appreciated from 6.8 to 11.28 in the last three quarters, a rise of 65.5 per cent.

Aurobindo sources, including the chairman’s office, were unreachable despite repeated attempts by e-mail and telephone. Novartis sources declined comment. "It is Novartis policy not to comment on market rumors or speculations," said Corinne Hoff, Novartis Global Media elations. The $ 28.2 billion Novartis is the world’s fifth largest pharmaceuticals company and owns Sandoz, makers of the cult drug Calcium Sandoz.

Teva sources too, declined comment. "We do not comment on future activities, as Teva is a public company. All company announcements are made according to regulations," said Teva spokesperson Keren Golan as part of an e-mail response.

PV Ramaprasad Reddy, chairman, Aurobindo, holds 29.11 per cent in the company at present. At the day-end price on Monday, his holding works out to Rs 1124 crore in terms of market capitalisation. Institutional investors including Standard Chartered and Goldman Sachs, hold 38.2 per cent.

Investment banking sources said that the deal could happen if the institutional investors cashed out just as in the case of Matrix Laboratories. Global funds like Newbridge and Maxwell have recently sold their stakes in Matrix to Us-based Mylan Laboratories. Matrix’ managing director N Prasad also sold its 33 per cent stake. "A similar deal could be brewing in Aurobindo too," said an investment banking source.         

This makes the company a potential candidate for a possible takeover bid. According to the Securities and Exchange Board of India (Sebi) guidelines, an acquirer may make an open offer on the stock market after buying out more than 15 per cent in the target company.

E-mail Suprotip Ghosh: suprotip.ghosh@hindustantimes.com