DSM announced a marketing and sales alliance on eight Active Pharmaceutical Ingredients (API) with the Indian-based company Indoco.
The APIs are manufactured by Indoco and will be marketed and sold by DSM Pharmaceutical Products. DSM’s experience and quality systems should help to fuel growth of these APIs in regulated markets.
Indoco has annual turnover of about $ 120m and employs about 4,000 people.
DSM Pharmaceutical Products, which is part of the Pharma cluster and posted € 392m sales in 2010, has seen lacklustre earnings in the past years, mainly the result of an overcapacity issue at industry level. The group is trying to fix the issue by own efforts (like the construction of a 6-APA plant in China) and the search for partners that could help to improve capacity utilization rates. Today’s announcement is one small step towards improving the financial performance of Pharmaceutical Products, but not more than that. We are still waiting for a larger partnership deal like the company announced last year on its Anti-Infective business.
No change to our BUY rating and € 50 target price.