This is the second pharma merger and acquisition (M&A) transaction that has been called off or postponed recently due to market volatility and valuation mismatch. Hyderabad-based Aurobindo Pharma had also scrapped the demerger and sale of its injectables arm Eugia Pharma Specialities to Blackstone earlier this year.
Cipla, the sole final contender for Mumbai-based Medley, submitted a bid of around ₹4,000 crore. The promoters of Medley had expected ₹5,000-5,500 crore.
In addition, some of the buyout terms were not acceptable to the promoters, one person said.
ET was the first to report in September that Cipla, KKR-owned JB Chemicals and Torrent Pharma were in the last lap to acquire Medley in a deal worth around ₹4,500 crore.
Kotak Mahindra Capital advised Medley’s promoters, who had received half a dozen bids, including from 2-3 private equity funds.
Cipla and Medley did not respond to ET’s emails till press time on Sunday. Set up in 1969 by Sami Khatib as Medley Laboratories, the privately held company, later renamed Medley Pharmaceuticals, employs more than 3,000 people, of which about 2,200 are part of its sales force. There are around 700 associates working in ists corporate and manufacturing operations across India and another 100 in international business.
The company, with a specialisation in iron preparations, sells top brands RB Tone syrup, Dompan (domperidone & pantoprazole), O2 (ornidazole & ofloxacin), Tazocef (tazobactam & ceftriaxone) & Ostium k2 (Vitamin K27 combination in India).
RB Tone and O2 feature among the top 300 pharma brands in India, as per an IMS-ORG survey.
RB Tone is the second largest selling drug in the haematinic segment, while O2 is the top-selling drug in the anti-diarrhoeal segment.
Medley has a strong position in the domestic formulations market, which contributed 87% to total sales in fiscal year 2022. The product profile is moderately diversified with the top five brands accounting for 57% of revenue, according to a recent Crisil report.
Its revenue is estimated to have grown by 16% to ₹926 crore in fiscal year 2022, from ₹800 crore in the year before, backed by increased contribution from the acute segment (about 53% of overall sales) and rest from the chronic segment.
The company is likely to maintain a growth rate of 8-10% over the medium term, driven by its established position in the domestic formulations market and increasing focus on the chronic segment (which now accounts for 47% of sales, compared to 30% a few years ago), the report from Crisil showed.
Cipla has been scouting for more buyouts since 2015, when Samina Hamied – niece of chairman Yusuf Hamied – joined the company as executive vice-chairperson.