Monday, October 22, 2012

Octoplus Acquisition - Dr. Reddy expediting its presence in Value Added Generics

Dr. Reddy announced acquisition of Octoplus NV for a consideration of Euro 27.4 million. Octoplus has strengths in drug  delivery, formulation and manufacturing based on proprietory technologies.

The most advanced product in Octoplus pipeline is Locteron ( an advanced version of PegInterferon) which requires less frequent administration (once every two weeks as compared to once weekly) and also causes fewer side effects (reduction in flu like symptoms and depression). Locteron is already partnered with Biolex. A Phase 2 b study has already been completed in 2011. Octoplus is most likely eligible for milestone payments, as soon as Phase 3 studies are initiated. Inteferons. The interferon, which are intended for the treatment of HCV comprise a $2billion market. With the expected entry of interferon free regime, there is uncertainty on the potential of Locteron and its value for Octoplus.

Besides Locteron, Octoplus is also in collaboration with  Esbatech, an Alcon/Novartis division, for developing  a controlled release formulation of an ophthalmic compound

Acquisition Rationale
 In terms of valuation, Dr. Reddy has paid approximately 3x revenues. In 1H-2012, Octoplus generated revenues of Euro 4.8million. and net loss of euro 2.5 million.
 Octoplus drug delivery and formulation technologies would very well complement Dr. Reddy's API and regulatory expertise, generic drug developmental skill and global reach. The acquisition makes tremendous strategic sense especially at a time when market for copy-cat oral formulations is getting increasingly commoditized.