Piramal Enterprises’ (PEL) wholly owned pharma subsidiary Piramal Pharma (PPL) has announced the acquisition of Hemmo Pharma for an upfront money consideration of Rs 7.75 billion and further milestone linked payments. PPL believes that Hemmo’s forte in peptide API manufacturing will not only complement the current CDMO business enterprise but also provide further development chance as properly as provide vertical integration led advantages. In our assumption, the deal is valued at 7.0xFY21E sales and 20.0xFY21E EV/EBITDA.
We count on Hemmo to develop its income at a CAGR of 30.% more than FY21E-FY23E. We stay positive on PPL’s one of a kind positioning in the pharma business enterprise with its CDMO services and essential care items. Maintain ‘buy’ with a revised target cost of Rs 2,278/share (earlier: Rs 2,265).
Hemmo Pharma — PPL has acquired one hundred% of Hemmo Pharma for an upfront money consideration of Rs 7.75 billion and further milestone linked payments. This acquisition is anticipated to full inside next 4-6weeks topic to completion of required approvals. Hemmo is one of India’s biggest producers of synthetic peptides with a legacy of practically 4 decades. It has a powerful knowledge in each remedy and strong phase synthesis of peptides with a healthful commercialised solution basket and pipeline of below improvement items.
Globally peptide API market place has a size of $2 billion which is expanding at 6-8% each year. Hemmo generates ~75% of sales from exports and ~67% is to the regulated market place. It has an R&D facility in Thane and a globe class GMP manufacturing facility at Turbhe that is deemed compliant by USFDA, EU and numerous Asian regulators.
Financial effect — PPL believes that Hemmo will bring yet another development lever for its CDMO business enterprise by introducing integrated services with improvement and manufacturing of peptide drugs. Additionally, synergies from vertical integration in between the two providers coupled with greater scale and attain for commercialised (and below improvement) drugs of Hemmo would outcome in greater development and greater profitability. We assume Hemmo sales for FY21E to be Rs 1.1 billion expanding 30% more than FY20 with a margin variety of 30-35%. On this economic efficiency, valuation of the acquisition is pegged at 7.0xFY21E sales and 20.0xFY21E EV/EBITDA. PPL’s debt level will rise to Rs 33.8 billion ($450 million) post this acquisition.