Mumbai: Nicholas Piramal India Limited (NPIL) has announced its second acquisition in the UK - custom manufacturer Avecia Pharmaceuticals (Sales turnover in 2004: £27.1 million), for£9.5 million. The consideration is inclusive of funding the business' UK pension fund deficit of between £8-9 million. The transaction completion is subject to required regulatory and other approvals.

This M&A transaction comes 10 months after NPIL's acquisition of Rhodia's Inhalation Anaesthetics business in December 2004. The transaction is in the nature of a share purchase on a liabilities and cash-free basis. It includes working capital of £ 8.8 million
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Avecia Pharmaceuticals is a global custom manufacturing pharma company focused on providing custom chemical synthesis and manufacturing services for the innovator pharmaceutical and biotechnology companies. Avecia had consolidated sales of £36.1 million (Rs2.9 billion) in 2004. The business includes early / late-stage and launched manufacturing assets in the UK and North America, a deep pipeline of products backed by strong customer relationships and a mix of unique technologies.

Explaining the strategic intent behind the acquisition, Ajay Piramal, chairman, Nicholas Piramal, says, "Avecia Pharmaceuticals has a long tradition of technology-driven, high-end service to the global pharmaceuticals industry, driven by highly competent specialists. The merger of this business with our custom manufacturing group will go a long way in making the combined entity a truly global custom manufacturing player."

The British drug firm is part of the UK-based Avecia Group, which was acquired by private equity funds managed by Cinven and Investcorp International in 1999 from AstraZeneca.

Nicholas Piramal's acquisition of Avecia Pharmaceuticals signifies the start of a new wave of restructuring within the global custom manufacturing industry. Manufacturers in Europe and North America, driven by their access to technologies and customers, have historically dominated this $15-billion industry. However, over the last few years, increased cost pressure and downturn in the pharma sector has put these players under pressure.

Industry analysts believe that the winning custom manufacturers of the future will have a strong manufacturing base in India with technology and early-phase beachheads in North America and Europe.

This transaction is the first step in NPIL's strategy of establishing such a global footprint for its custom manufacturing business. The reconfigured asset base will include access to leading early phase assets, including nearly 100 early-phase and launched products.

This acquisition has also enabled NPIL to have established a presence in both the Western European and North American regions for value-added manufacturing, with access to key technologies in chiral synthesis, fermentation, bio transformation and high potency substances. It also has access to a high quality process R&D team, including 53 PhDs.

Through the Avecia acquisition, NPIL gains control of :

• Canada-based Torcan (Too4 sales turnover £9.0 million), which specialises in custom synthesis for pre-clinical and early-phase clinical trials products for biotech and mid-size pharmaceutical companies
  
• 25 per cent ownership of Manchester-based Reaxa Limited, which houses key new proprietary technology, developed by Avecia Pharmaceuticals in collaboration with Cambridge University over the last six year's. The technology enables encapsulation of catalysts and reagents that reduce product contamination by toxic metals and lowers effluent loading.
  
• And the three important business divisions of Avecia ('early phase delivery team (EPDT); pharma products division and; high potency substances or HPS)