India's Biocon exits enzymes business

Biocon sells its enzymes business to Denmark's Novozymes for $115 million in an attempt to become a more focussed biotechnology player.
Indian biotechnology player Biocon announced on July 18 that it will sell its enzymes business to Novozymes of Denmark for $115 million.

Biocon is currently in the bio-pharmaceuticals, contract research, clinical research and enzymes businesses. Its enzymes division offers a range of industrial enzymes, food additives, process aids and enzymes for the juice and wine industries. The divestiture is designed to sharpen BioconÆs focus on its bio-pharmaceuticals business, which includes active pharmaceutical ingredients, biologicals and proprietary molecules.

Of the total consideration of $115 million, $97 million will be paid up front and $5 million when certain business targets are met. The balance of $13 million relates to committed service fees and lease payments, to be paid over a period of up to 10 years.

The price of $102 million (excluding lease payments) represents a multiple of around four times the sales generated by the unit in the fiscal year to March 31, 2007. Sales for this period were approximately Rs 1 billion ($24.9 million), representing 12% of Biocon's revenues.

Biocon started business in 1978 as an enzymes player but diversified into the production of statins (cholesterol blockers). Its product Lovastin is one of IndiaÆs only US FDA approved statins. Over time, Biocon has further broadened its product portfolio and currently says that products relating to cardio, diabetes and oncology are its stated focus areas. The enzymes business has thus been marginalised in the product portfolio.

Novozymes is both a supplier and customer for Biocon. The Biocon unit is in Bangalore, as is Novozymes' current India business unit. The Biocon enzymes business will be integrated into Novozymes South Asia, which was established in 1998, and will continue to operate at the Biocon site under a lease arrangement with Biocon. Around 150 employees will join Novozymes.

Novozymes says India is an attractive market, driven by strong growth in enzyme use, and it expects growth to be maintained at more than 15% per annum over the next 10 years.

The transaction is subject to shareholder approval by BioconÆs shareholders. Shareholders representing around 60% of the total shares have already committed to vote in favour of the transaction.

Biocon was advised by Allegro Capital Advisors and Novozymes by SEB Enskilda and KPMG Investment Banking.
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