KKR agrees capital injection

This was never going happen with Gland. "The promoter was very clear that he wanted to stay on and continue to grow the business," says Karan Swani, a principal at KKR. "Selling to a strategic investor wasn't an option because it would have meant giving up control."

The attractiveness of Gland lies in its cost advantage as an India-based manufacturer and its strong position in an industry struggling with product shortages.

According to the US Food and Drug Administration (FDA), there were 117 new drug shortages in 2012, of which 84 cases involved sterile injectable drugs. This is down from 2011, but shortages of older sterile injectable drugs persist. Discontinuations, production delays and limited raw materials are contributing factors, but a number of manufacturers have also been shuttered after their facilities were found to be non-sterile.

"A lot of shortages can be linked to the complexity of the manufacturing process and facilities in the US having run afoul of FDA regulations," says Heramb Hajarnavis, a director at KKR. "This trend will continue for the next couple of years."

In 2003, Gland became the first Indian firm to receive FDA approval for pharmaceutical liquid injectable products and there have been no run-ins with the regulator. Gland's work in India on pre-filled syringe technology and Heparin technology has successfully translated into commercial sales in the US.

A partnership with Germany's Vetter Pharma, a global leader in pre-filled syringe technology, helped Gland introduce the right technologies and practices and the Vetter family retains a small minority position in the company.

Swani adds that Gland benefits from being a vertically integrated producer. It makes many of the active pharmaceutical ingredients used in its drugs, which allows greater control over the process.

KKR's investment - thought to be for a 35-40% stake and still pending final regulatory approval - will be structured in two parts: an infusion of fresh equity followed by the purchase of Evolvence India Life Sciences Fund's interest in the business. The PE firm is expected to help the company grow its manufacturing capacity and expanding product registrations.

Following the acquisition of Agila by generic drug maker Mylan for $1.6 billion earlier this year, Gland is by some distance the largest pure-play injectables manufacturer in India. According to Research & Markets, the global market for these drugs will be worth $43.3 billion by 2017, reflecting compound annual growth of 14% over the preceding five years.

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• Topics
• Expansion
• South Asia
• Healthcare
• Exits
• India
• healthcare
• KKR
• Growth capital
• Exit