Dr. Reddy's buys Haleon's NTR biz outside U.S. for £500 mn

British consumer healthcare company Haleon Plc today entered into an agreement to sell its nicotine replacement therapy (“NRT”) business outside of the US to Dr. Reddy’s Laboratories SA, a wholly owned subsidiary of Dr. Reddy’s Laboratories Ltd, for £500 million, with additional proceeds from the transfer of inventory.

The portfolio consists of brands including Nicotinell, Nicabate, Habitrol and Thrive available in gum, lozenge and patch forms across over 30 markets. The proposed acquisition will be inclusive of all formats such as lozenge, patch, and gum as well as pipeline products, in all applicable global markets outside of the United States, the company says in a statement.

Dr. Reddy's says Nicotinell is the second biggest brand globally, excluding the United States, in the NRT category. The company will acquire the share capital of Northstar Switzerland SARL for GBP 500 million, with an upfront cash payment of GBP 458 million and performance-based contingent payments of up to GBP 42 million, payable in 2025 and 2026.

The transaction is expected to close in early Q4 of calendar year 2024. After the closing of the deal, Dr. Reddy’s will acquire the NRT business in all countries outside of the United States. However, operations will transition to Dr. Reddy’s in a phased approach to ensure the successful integration of the business.

Notably, tobacco use causes 8 million deaths every year from health consequences such as cardiovascular diseases, lung disorders, cancers, diabetes, and many other debilitating diseases. According to the World Health Organisation (“WHO”), of the 1.3 billion tobacco users globally, as many as 60% have expressed the desire to quit; however, only 30% have access to the tools to help them to do so successfully.

"Safe and effective medical treatments to help individuals quit tobacco are available, but not always sufficiently available or accessible," the company says, adding that NRT is recommended by the WHO Model List of Essential Medicines for nicotine use disorders.

The transaction is expected to close by early Q4 of calendar year 2024. Haleon's financial results of the NRT business represented net revenue of £217 million for the financial year ended 31 December 2023. "Assuming completion of the transaction in early Q4 2024, this divestment is expected to dilute FY 2024 net revenue and adjusted operating profit by c. 0.5% and c. 1% respectively. All other FY 2024 guidance as shared in the Q1 Trading Statement on 1 May 2024 is unchanged," the UK-based Haleon.

Haleon CEO Brian McNamara says the divestment is consistent with its strategy as it implements change to become more agile and competitive. "Whilst this business has great brands, these are not core for us, but I'm sure they will continue to flourish given the focus and capability of Dr Reddy's.” Dr Reddy's share closed 0.09% down at ₹6,068.45 on the BSE today.