Panacea Biotec Shares Gain On Sale Of Domestic Formulations Brands To Mankind

Shares of Panacea Biotec Ltd. gained after it transferred its domestic pharmaceutical formulations business to Mankind Pharma Ltd. to pare debt and focus on exports.

Panacea Biotec Pharma Ltd., a 100% subsidiary of the generic and specialty pharma company, agreed to sell its formulations (finished drugs) brands in India and Nepal to Mankind for Rs 1,872 crore, according to an exchange filing. The transfer was approved by its board and shareholders on Feb. 1.

The consideration includes payment towards royalty for licensing of identified patents, grant of technical know-how, transition services, non-compete clause and advance against manufacturing and supply agreement, and supply of products to Mankind Pharma.

Extra goods and services tax will be charged on the deal and the company would receive the consideration subject to deduction of applicable TDS.

As part of the arrangement, Mankind Pharma will retain Panacea Biotec's sales and marketing team. The transaction is expected to be completed within the current financial year, on or before March 31, 2022, the filing said.

“The sale of the domestic formulations brand portfolio is in line with the company's strategic plan to become debt-free, and focus on exports of pharmaceutical formulations in the U.S. and other international markets, besides the vaccine business in global markets,” Rajesh Jain, managing director at Panacea Biotec, was quoted as saying in the filing.

The divestment, according to him, would ensure adequate liquidity for these businesses, and is expected to drive investments in products under development and expand capacities for key vaccine projects.

Panacea Biotec's consolidated revenue stood at Rs 634.78 crore, and the domestic formulations brands being sold have reported revenue worth Rs 132 crore in the first half of FY22. That is almost 42% of Panacea Biotec's consolidated revenue for the first half of this fiscal. For FY21, it contributed to more than 35% of the total consolidated revenue of the company.

The company's total debt stood at Rs 1,589.5 crore as on Sept. 30, of which Rs 1,115.4 crore related to borrowings and other financial liabilities.

“Through this acquisition, Mankind Pharma will be able to explore new therapeutic areas and create visibility in lifestyle, oncology and transplant business,” Rajeev Juneja, managing director and vice chairman of Mankind Pharma, said in the filing.

Mankind currently manufactures and sells oral solids, oral liquids, soft gelatine capsules and injectables.

Shares of Panacea Biotec closed as much as 5% higher after the announcement on Wednesday.