Biocon Acquires GE's Stake In Syngene International

Medical Marvel: Biocon Acquires GE's Stake In Syngene International

Pharmaceutical company Biocon led by Kiran Mazumdar Shaw has just recovery cure when it comes to increasing share value. The drug maker's shares experienced a new high following the announcement that it will be acquiring GE Capital's entire stake of 7.69% (7.7% according to some media reports) for whooping Rs, 215 crore. Interestingly, the company sold the said stake for Rs. 125 crore on 31st October in the year 2012. It is nearing October again that this announcement has been made for the acquisition of the stake.

Biocon is paying almost twice the amount to win back the stake. So, why is the price so high and what are the stakes it is so keen to overcome? It could be that the company has to bolster its share value following new developments in the pharma field. Biocon is also into R & D and this could therefore be a step in the right direction.

According to a statement released by the company during BSE filing, “Biocon Research Ltd, a wholly owned subsidiary of Biocon, has entered into an agreement with GE Equity International Mauritius, a subsidiary of GE Capital Corporation to purchase the latter’s investment in Biocon’s research services subsidiary, Syngene International for an agreed consideration of Rs215.38 crore,” the company said in a BSE filing.

Syngene is involved in the field of discovery of integrated drugs and development services along with strong research orientation and capacities in fields such as medicinal chemistry as well as biology, toxicology and in vivo pharmaceuticals and pharmacology. The company has considerable research expertise. It has a team of over 1,500 scientists to fuel the R&D programme for companies involved in global pharma, nutrition and biotech.

Shares of Biocon rose by about 2% at Rs. 511 following the company's plan to acquire the stakes in Syngene. The latter company's research arm is valued at Rs. 2800 crores. The buyback is being initiated and carried out by Biocon Research Limited. The latter is a wholly owned subsidiary of the Biocon group. Ge Capital had time valued Syngene at a post cash valuation of INR 1625 crore.

At the time of its sale to GE, Syngene had accounted for one-fourth of the revenues of Biocon Group. The exact numbers? Rs. 2900 crore on an annualised basis according to media reports. Syngene was established as a subsidiary of the Biocon Limited group in the year 1994. Apart from its research capabilities, Syngene is also known for its expertise in custom synthesis as well as formulation development of large as well as small molecules.

Syngene also reported anet profit of INR 8.71 million for the 9 month period ending December 2013. According to a CRISIL report quoted by Deal Curry, in this financial year, Syngene is planning to merge Clinigene with itself. With another change in its fortunes, Syngene could be the wonder drug Biocon needs for profitable financial year.