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Lupin sells Japanese arm Kyowa for $300 million

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MUMBAI: Lupin Pharma, India’s fourth-biggest drug-maker by market value, has sold its entire stake in its Japanese subsidiary Kyowa for $300 million to private equity firm Unison, as the seller expects fewer future incentives from Tokyo for generic drugs would make the business less attractive. ET was the first to report this sale by the company in its edition dated November 1.

Kyowa is now ranked sixth among the generic drug producers in Japan. Under the terms of the agreement, Lupin’s subsidiary Nanomi B.V.

will divest its entire stake (99.82%) in Kyowa to Unison’s entity Plutus Ltd.

for an enterprise value of ¥57,361 million, or ₹3,700 crore, subject to closing adjustments. The divested business recorded revenues of ¥14,241 million in H1, FY20 (¥28,335 million in FY 2019).

The proposed transaction values Kyowa at an enterprise value of ¥57,361 million (~ ₹3,700 crore) and will generate post-tax net cash inflow of approximately ¥32,596 million (~$300 million). Nomura was the sole advisor to the deal. After this deal, Lupin’s net debt will be at ₹1,129 crore, compared with ₹4,362 crore as on September 30.

Net debt to equity ratio will improve to 0.08, from 0.32 as on September 30. Replying to ET’s query, Lupin MD Nilesh Gupta said the company made 4½ x the initial investment it made in Japan. “The Japanese government is happy with the genericisation it has achieved and it is taking away the incentives which were given for generics.

Going forward, we have to have a differentiated play in this market,” Gupta said. The company retains an interest in biosimilars, and is leveraging its specialty portfolios where it would consider partnering Unison. “This transaction is aligned with our vision to focus on key markets and strategic priorities to achieve sustainable growth.

The deal proceeds will be utilised to strengthen Lupin’s balance sheet and to provide growth capital to support organic and inorganic initiatives for our focus markets,” said Vinita Gupta, CEO, Lupin. The company’s focus on expanding its biosimilar and complex generics portfolio will continue, including in Japan, according to Nilesh Gupta. Lupin had acquired Kyowa in 2007 from the Sugiura family, and was the first Indian company to have entered the complex Japanese drug market.




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