Debt-strapped pharma major Wockhardt on Wednesday sold select divisions of its branded generics business in India, Nepal, Sri Lanka, Bhutan and Maldives comprising 62 products and a manufacturing plant to Hyderabad-based drug maker Dr Reddy's Laboratories (DRL) for Rs 1850 crore. The business is valued at 3.8 times the annualised revenue and Wockhardt thinks the deal helps them to focus on its niche antibiotics portfolio apart from infusing liquidity.

Wockhardt's board of directors approved the sale and the transaction is expected to be completed by May 2020. The business is sold on a slump sale basis.

As part of the deal, 62 products and their line extensions along with related business assets and liabilities, contracts, permits, intellectual properties, employees and marketing, sales and distribution of the same (in India, Nepal, Bhutan, Sri Lanka and Maldives) are being transferred to DRL. This is part of Wockhardt's branded generics division and the constitutes brands in therapy areas like respiratory, neurology, vitamins, minerals and nutrients, dermatology, gastroenterology, pain and vaccines.

Along with this, Wockhardt's plant in Baddi, Himachal Pradesh is also being sold to DRL together with entire manpower of the plant.

In FY19 this business contributed around Rs 594 crore (or around 28 per cent of the total standalone and 14 per cent of the consolidated revenue from operations). For the nine month period this fiscal, the above business have contributed Rs 377 crore or around 34 per cent of the standalone and 15 per cent of the consolidated revenue from operations, Wockhardt said.

"The intended sale of Business portfolio is in line with the company's strategic plan to shift from acute therapeutic areas to more chronic business like anti-diabetes, central nervous system (CNS) etc. and also to its niche antibiotic portfolio of new chemical entities (NCEs). The divestment will also ensure adequate liquidity to bring in robust growth in the chronic domestic branded business, international operations, investments in Biosimilars for the US market apart from the company's Global clinical trials of break-through Anti-lnfectives and R&D activities" said Habil Khorakiwala, founder chairman, Wockhardt Group.

Post the sale, Wockhardt would continue to own its entire international operations in UK, US, Ireland and some other locations through its step down subsidiaries. It has formulation plans at multiple locations across India - Waluj, Shendra, Chikalthana in Aurangabad, Bhimpore and Kadaiya in Daman; bulk drugs plant at Ankleshwar apart from international locations like Ireland. In fact, 72 per cent of Wockhardt's consolidated revenues come from international operations.

DRL, on the other hand, sees the acquisition as a strategic move to boost its domestic business. G V Prasad, the Co-Chairman and Managing Director of DRL said "India is an important market for us and this acquisition will help in considerably scaling-up our domestic business. The acquired portfolio shall enhance Dr. Reddy's presence. in the high growth therapy areas with market leading brands such as Practin, Zedex, Bro-zedex, Tryptomer and Biovac. We believe the portfolio holds a lot of potential and will get an impetus under Dr. Reddy's. We welcome the team joining as part of the deal to the Dr. Reddy's family."

For Wockhardt, the deal brings in the much needed liquidity it needs to spruce up its existing business, especially the R&D for its novel antibiotic pipeline.

The company has a huge debt to service. As on March 2019 its net debt stood at Rs 2913 crore. The firm has managed to pare that down - to approximately Rs 2300 crore as on December. It had a Rs 340 crore payment due in December. Out of this it had a refinance done for about $40 mn (or around Rs 280 crore). It was an international refinancing, sources said. The balance was paid from internal resources and the promoters' family office.

Last month Wockhardt saw some breakthrough in its novel antibiotics pipeline as the Indian drug regulator gave nod for two of its novel antibiotics - Emrok and Emrok O - that are used for acute bacterial skin and skin structure Infections including diabetic foot infections. The company expects to build these into Rs 100 crore brands over the next 18-24 months. The new drug will target certain superbugs, which have become resistant to other molecules.

At present, antimicrobial resistance is a major public health concern globally estimated to cause 2 million deaths in India alone by 2050. Infections caused by drug-resistant organisms could lead to increased mortality and prolonged duration of hospitalisation, and India is especially susceptible to this problem.

Wockhardt plans to launch them soon in the Indian market as well as take these to the emerging markets as well as China.