Adcock stops bidding Medpro as Cipla threatens to end supply deal

Adcock Ingram made the $264 m offer to its smaller South African rival Cipla Medpro in April

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Adcock stops bidding Medpro as Cipla threatens to end supply deal

Adcock Ingram made the $264 m offer to its smaller South African rival Cipla Medpro in April

South Africa’s leading over-the-counter (OTC) drugs player Adcock Ingram is unlikely to proceed with its $264 million takeover bid of Cipla Medpro South following the threat of ending supply pact from Medpro’s strategic partner Cipla Ltd of India.

India’s top generic maker Cipla is Medpro is principal supplier and it could end its long standing supply agreement of drugs and raw materials to Medpro, if the Medpro merges with Adcock against the interest of the company.
Recently, Amar Lulla, the chief executive officer of Mumbai-based Cipla has stated that the company had all the options available to exit from the joint venture in the event of a change of management in Cipla Medpro, including the termination of the supply line.
Clarifying its position on Adcock Ingram’s takeover attempts of Cipla Medpro of South Africa, said in a letter addressed to Adcock CEO Jonathan Louw dated April 21 that he sees “no compelling case to merge the two companies.”
Adcock Ingram, which made the $264 million (that come around 2.13 billion rand in South African currency terms) offer in April was not aware of “termination right” in the supply agreement that had not been disclosed publicly,Adcock said in a statement to the city’s stock exchange.
The right to terminate the supply of pharmaceutical raw materials is at Cipla’s own disposal, and hence it can use the option when it desires so jeopardising Medpro’s operations.
Johannesburg stock exchange is now investigating the supply agreement terms between Medpro and Cipla, after receiving a complaint to this effect from Adcock.
Meanwhile, Cipla maintained that the termination right in the supply agreement is only one among the several terms of Cipla-Medpro deal. “There are many rights in the agreement, termination is one of them,” Lulla was quoted as saying. Lulla also said Adcock would have discovered the clause had it done a “due diligence” beforehand.
There has been reports that Cipla Medpro SA was considering the takeover offer by Adcock Ingram despite the rejection of the bid by Cipla.
However, Adcock has come to the decision to carry forward the acquisition bid owing to a lack of response from Cipla Medpro’s board. Adcock, also, apparently discouraged by Medpro’s use of “the stated opposition of its principal supplier”.
Cipla Medpro South Africa Ltd is one of South Africa’s top ten pharmaceutical groups. Cipla Medpro’s operations comprise two divisions: Cape Town-based Cipla Medpro, the country’s sixth largest pharmaceutical company and provider of a range of chronic medicines and OTC (Over the Counter) products to the public and private sector; and one of the first international PIC/S compliant pharmaceutical manufacturing facilities in South Africa, Cipla Medpro Manufacturing (Pty) Ltd, based in Durban, KwaZulu-Natal which also offers contract manufacturing solutions to large local and multinational pharmaceutical companies.
Cipla Medpro was founded in 1992, combining the businesses Medpro Pharmaceutica / Cipla Medpro. Medpro’s strategic alliance with Cipla International has been key to allowing the company to continuously increase market share through the launch of a number of new molecules.
Cipla Medpro offers medicines and products across a broad range of categories, including some of today’s most challenging disease categories such as cardio-respiratory, diabetes, oncology, psychiatry and HIV/Aids.
Cipla currently has 15 ARV’s registered with the South African Medicines Control Council, a further 14 awaiting registration and another 9 in the pipeline from Cipla International. Cipla Medpro was the first to release SA’s first three-in-one antiretroviral (ARV), Triomune in 2006 and more recently launched the first single tablet, once-daily dosage of the ARV, lamivudine.
Cipla Medpro was the third largest local generic medicines company (by volume) and sixth largest pharmaceutical company (by value) in November 2007 according to IMS.
Adcock Ingram is a leading South African pharmaceutical company. It is also the longest standing pharmaceutical company. The company has an extensive range of prescription, generic and OTC products and also provides life saving hospital equipment, diagnostic products and services.
Adcock Ingram recently launched a range of generic ARVs. These were developed in-house by a team of senior researchers at Adcock Ingram’s WHO approved Research site in Aeroton.
Adcock Ingram is South Africa’s second largest pharma firm after Aspen.
Adcock Ingram has partnership with Medreich for the past seven years and formed a manufacturing joint venture in Bangalore 18 months ago to make over-the-counter (OTC) products for the South African and African region.