If successful, this will be the largest-ever acquisition by an Indian pharma company, both at home and abroad, trumping the $3.2-billion acquisition of Daiichi Sankyo’s stake in Ranbaxy in 2014, or Biocon Biologics’ $3.3 billion cash and stock buyout of the global biosimilars business of US-based Viatris.
Aurobindo is competing with US private equity firm GTCR, the other serious contender left in the fray. Both sides are engaged in intense negotiations to finalise the various commercial and operations aspects of the transaction.
Since late last year, Advent has been engaged with advisers Goldman Sachs and boutique investment bank PJT Partners to explore exit options for Zentiva, which it acquired seven years ago.
Boost to Aurobindo’s European footprint
Approaches were made to several financial investors, including TPG and pharma competitors worldwide for a potential takeover.
“The competition heated up from May. The binding offers have been submitted a few weeks ago and ongoing discussions have reached an advanced stage,” said a PE executive involved in the matter. “Price is no longer being negotiated… A formal announcement can happen in the next fortnight or a month.”
Zentiva will significantly boost Aurobindo’s European footprint, specifically in the east European region–Czech Republic, Romania and Slovakia—where the market is seen as fertile and steadily warming up to a raft of biosimilars, following patent expiries of big prescription brands. Besides, as most healthcare spending in eastern Europe is led by government bulk public procurement, the returns are steadier as compared to perpetual price erosion in the US.
Aurobindo’s revenues from Europe are already the highest among all other homegrown pharma peers. For calendar 2024, Zentiva Group’s revenues were 1.7 billion euros ($1.98 billion) at an ebitda of 400 million euros ($467 million). Even then, analysts are surprised at the boldness of the bet that the Hyderabad-based company is willing to take amid heightened geopolitical risks and tariff threats.
Aurobindo’s market value stands at Rs 63,684.90 crore ($7.4 billion), whereas Zentiva is privately held. According to people aware of developments, Aurobindo has already secured a $4.75-billion credit line from MUFG–the sole financier in the transaction–as a bridge loan for the transaction. The remaining $800 million will be from the company’s internal accruals.
Aurobindo and Zentiva didn’t respond to queries. Advent and MUFG declined to comment.
Bloomberg was the first to report on the Zentiva sale last November and on Aurobindo’s interest in July this year.
Change of hands
With origins that can be traced back to Black Eagle Pharmacy from the 15th century, Zentiva was nationalised in 1946 and has undergone several ownership changes, including one in 1998 when the management team had taken over a majority share to refocus on branded generics. A decade later, in 2009, it got acquired by Sanofi and in 2018, got carved out by Advent for $2.4 billion, a deal process that had even seen a preliminary interest from India’s Torrent Pharma.
Over the years, it has diversified its presence across categories such as prescription drugs, OTC products and consumer health and food supplements as well as geographies, growing both organically and through a series of buyouts across the region. It currently operates in 30 countries and has set a goal to reach one in five people across Europe by 2028.
In India, Zentiva has a manufacturing site in Gujarat. In 2022, Polish firm Pol Pharma, backed by a few private equity players, was reported to have placed a $3.5-billion bid for Zentiva, but the discussions remained inconclusive as the owners were reportedly considering a public float.
Interestingly, leading drugmakers such as Biocon and, more recently, Lupin, have struck separate deals with Zentiva to push their biosimilars in the European region. Aurobindo is developing a robust pipeline of biosimilars such as denosumab (Prolia) for osteoporosis as well as omalizumab (Xolair) and bevacizumab (Avastin) for multiple cancer treatments.
“While pricing pressure persists in chronic therapies, the European Union (EU) remains attractive for oncology and retail segments. Ongoing investments in EU-focused capacity continue to support volume growth,” said Amey Chalke of JM Financial.
The EU business of Aurobindo reported 9% revenue growth in the June quarter, from a year ago, with a strong performance across major markets and is on track to cross 1 billion euros in annual revenue in FY26. Injectables grew about 20% from the year earlier, driven by shortage-led demand. Two new oncology lines are being added to meet rising needs, as per the management.
The company also received four biosimilar approvals with commercial supplies initiated in the UK and full ramp-up expected in the third or fourth quarter of this fiscal. Aurobindo is targeting 40–60% margins in the EU biosimilar segment and aims for a blended 50% gross margin. Inhouse manufacturing now exceeds half the total formulations volumes, thereby boosting margins, inching toward 20% Ebitda.
Of Aurobindo’s FY25 consolidated sales of Rs 31,724 crore ($3.6 billion), the US market accounted for Rs 14,186 crore, up 6.8% from the year earlier. The European business grew 16.6% to Rs 8,356 crore.
Last month, Aurobindo acquired US-based contract development and manufacturing organization (CDMO) player Lannett for $250 million to shore up its manufacturing presence in the US while enhancing its capabilities in manufacturing complex generic drugs such as controlled substances.
On at least three previous occasions, Aurobindo has either lost out to rivals or had to back out of marque transactions after announcing them. In 2020, it had to call off its deal to acquire the oral solids and dermatology business of Sandoz (part of Novartis) in the US for $900 million, failing to receive due approvals from US Federal Trade Commission even after two years.
