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Cipla looking at 25% Cipla Medpro investment

By Gareth Macdonald , 07-Sep-2010

Indian drugmaker Cipla may invest in South Africa’s Cipla Medpro to boost manufacturing capacity and improve access to rapidly expanding African pharmaceutical markets.

According to reports in the Indian media, Mumbai-headquartered generics manufacturer Cipla is looking at buying a 25 per cent stake in Medpro, with which it has an existing production and distribution partnership.

CEO S Radhakrishan told the Economic Times that: “Our board will take a decision on stake acquisition in Cipla Medpro unit in the next board meeting, which will happen in a month and half.”

Meanwhile India’s Business Standard reported that the investment would be focused on Medpro’s loss-making contract manufacturing subsidiary, quoting unnamed “executives close to the development.”

Abdul Davids of Kagiso Asset Management also suggested Cipla Medpro Manufacturing (CMM) was the target, telling South Africa’s Business Report that Cipla could pay a “negligible amount” for its stake given the units position.

Davids explained that: “[Cipla Medpro Manufacturing’s] running costs have become substantial and there is not enough revenue via the volumes to cover all the costs, which is resulting in losses.”

However he added that, if the investment takes place, capacity utilisation will increase meaning that the unit will “eventually be profitable."

Investment moves

News of the potential deal follows just weeks after Cipla bought a stake in Meditab Specialties to boost its active pharmaceutical ingredient (API) and intermediate production capacity.

The investment would also fit with moves Cipla made to prevent South African generics manufacturer Adcock Ingram from completing a hostile takeover of Medpro in April last year.

After several months of discussion Adcock withdrew its $233m, explaining that opposition by Medpro’s principal supplier Cipla had discouraged it from proceeding with the deal.

Cipla Medpro was not able to respond to in-pharmatechnologist’s request for additional information.

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