Drug firm in India to acquire Minrad
Will pay $40 million for troubled company
An Indian drugmaker is buying Minrad International, relieving the Orchard Park-based company of its cash crunch worries at a time when it faced delisting from the American Stock Exchange.
Piramal Healthcare Ltd. of Mumbai has agreed to pay $40 million in cash, which includes the assumption of Minrad’s debt, to buy the U. S. anesthesia maker. After the deal closes, Minrad will become a separate subsidiary of Piramal, one of India’s largest pharmaceutical and health care companies.
The deal combines two makers of inhaled anesthetics, and gives Piramal access to key intellectual property related to the manufacturing of the drugs. It also gives Piramal an immediate entry into the U. S. market for sevoflurane, the biggest selling inhalation anesthetic in the United States.
Minrad makes isoflurane, enflurane and sevoflurane, and is requesting accelerated approval from the U. S. Food and Drug Administration to make desflurane. Piramal is a leading maker of halothane and isoflurane.
The combined company will have a marketing and sales network of 178 distributors across 108 countries that can supply products to hospitals, pain management clinics, veterinary hospitals, university research centers and medical industrial users.
“The offer to Minrad is consistent with our commitment to build a serious global presence in critical care,” Ajay Piramal, chairman of the Piramal Group, said in a press release. “We respect the leading work that Minrad scientists and work force have built over the past many years.”
Minrad executives could not be reached for comment.
The sale marks an end to the independence of the 12-year-old Minrad, which has struggled in recent months as the credit crisis sapped its ability to get cash for operations.
Founded in 1996, Minrad sells its products in more than 50 countries and, until recently, employed 139 with operations in Orchard Park and at a manufacturing plant it purchased in 2000 in Bethlehem, Pa. The company went public in May 2006, selling 10 million shares at $3.25 a share to raise money for expansion and investment in research and development. It added a third drug-making line in 2007.
But it has never been able to earn a profit, despite a doubling of sales. Its losses topped $18 million in the first three quarters of the year, including $11.7 million just in its second quarter — much wider than the $3.4 million it lost a year earlier. That’s depleted its capital, forcing it to borrow more or raise more cash from investors. And it hindered its ability to make more product this year because it couldn’t pay for raw materials.
Meanwhile, its relationship with its main U. S. distributor in Idaho has deteriorated, with Minrad accusing the company of not paying for all the products it has sold, forcing Minrad to write off the $4.5 million debt as uncollectible and sever ties earlier this month, further disrupting U. S. sales.
As its cash situation worsened, the company hired Lehman Brothers in May, and then successor Barclays Capital in late September, to help it explore options. And last month it cut 50 jobs, or 35 percent of its work force, as it struggled to cut costs.
But even that wasn’t enough, and executives warned the company might still have to shut down by year-end if it didn’t raise cash or find a buyer. The Amex gave it until Friday to find a plan to meet the exchange’s listing requirements.
“The proposed transaction with Piramal is the result of an extended process undertaken by our board of directors and financial advisers to address the company’s capital requirements,” David DiGiacinto, president of Minrad, who was to take over as CEO in January from William Burns, said in the release.
“Our board believes the transaction is in the best interests of all our stakeholders, and also allows our employees to continue growing the Minrad business as part of a global leader in anesthetic products.”
Under the terms of the agreement, Piramal will pay 12 cents per share in cash for each Minrad share, and will buy Minrad’s 8 percent senior secured convertible notes from debt holders. As part of the agreement, Piramal provided Minrad with a senior secured loan of $12 million to give it capital until the merger closes.
The deal requires the approval of Minrad shareholders, but is not subject to any financing conditions. Holders of 20 percent of Minrad’s stock have already agreed to vote in favor of the deal, which is expected to close in the first quarter of 2009. Piramal expects the deal to add to its earnings for the fiscal year ending March 31, 2010.
Log into MyBuffalo to post a comment
MyBuffalo is the new social network from Buffalo.com. Your MyBuffalo account lets you comment on and rate stories at buffalonews.com. You can also head over to mybuffalo.com to share your blog posts, stories, photos, and videos with the community. Join now or learn more.
Reader comments