Gland Pharma to buy Cenexi for over ₹1000 crore

Injectables maker Gland Pharma on Tuesday said it entered into a put option agreement to acquire French firm Cenexi Group for an equity value not exceeding 20 million euros or approximately Rs 1,000 crore (enterprise value 230 million euros) to expand its contract development and manufacturing business in Europe.

Transaction would be funded by internal resources with no recourse to third-party funding, the company said. Gland Pharma shares closed 7.7 per cent higher on BSE.

Hyderabad-based Gland Pharma has entered into the agreement through its wholly-owned subsidiary Gland Pharma International PTE Ltd, Singapore.

The proposed acquisition remains subject to receipt of necessary regulatory approvals and satisfaction of certain conditions.

Founded in 2004, Cenexi, along with its subsidiaries, is engaged primarily in the business of Contract Development & Manufacturing Organisation (CDMO) of pharmaceutical products with expertise in sterile liquid and lyophilized fill-finished drugs, including capabilities on oncology and complex products. Cenexi was carved out from Roche, and has expertise in sterile injectables, makes ampoules, vials, etc.

Cenexi posted a revenue of 184 million euros in CY21, and 100 million euros in H1CY22, Gland Pharma said in its investor presentation.

“Seventy per cent of business is currently from sterile and injectable products, which is expected to grow further which increases to 82 per cent contribution from injectables in the next four years,” Gland Pharma said in the presentation.

It has presence across four manufacturing sites in Europe, which include three sites in France and one in Belgium. It has experience in processing specific substances, such as hormones, suspensions, and controlled substances.

It has employee strength of 1,372, including 1,252 employees across four manufacturing sites and 120 employees for services.

Srinivas Sadu, managing director and chief executive officer, Gland Pharma, said: “This proposed acquisition would be Gland Pharma’s first international acquisition, and it would perfectly support our goal of deepening access into the European markets. This acquisition would help expand our global presence and further solidify our identity as an injectable focused CDMO company.”

Sadu said the acquisition would expand Gland Pharma’s customer base and increase its share of wallet.

In Q2FY23, Gland Pharma posted revenues of Rs 1,044 crore against Rs 1,080 crore in the corresponding quarter last fiscal year. The profit after tax was down 20 per cent to Rs 241.2 crore. “We have generated Rs 62.7 crore of cash flow from operations in Q2 FY23,” Sadu said during the earnings call. The company said increased operating expenses, such as high logistics cost, hit the Ebitda during the quarter.

Gland Pharma’s core markets are US, Canada, Europe, and Australia, which together accounted for 72 per cent of its revenues in Q2FY23. India market accounts for 7 per cent of the Q2 revenues.

Cenexi CEO Christophe Durand said, “We view the combination of Cenexi with Gland Pharma, as a natural partnership which would both, support our long-term strategy of becoming a top European sterile player and help us drive the next phase of growth and international expansion for Cenexi.”

Clifford Chance LLP acted as the international legal advisor to Gland Pharma, while Cyril Amarchand Mangaldas acted as the Indian legal and regulatory advisor. Jefferies International and Natixis Partners acted as financial advisors to Cenexi, while Dechert LLP acted as legal advisor. Business Standard