Morpen Laboratories disclosed in a regulatory filing that the Board of Directors has approved the transfer of the Medical Devices Business of the company on a slump sale basis, for a lumpsum consideration by way of allotment of equity shares of Rs. 10/- each, to a wholly-owned subsidiary of the company, which is under the process of incorporation.

The transfer of business will be subject to receipt of requisite regulatory approvals including that of the members of the company and subject to execution of a business transfer agreement between the company and the wholly-owned subsidiary.

Transfer of the point-of-care Medical Devices Business into a wholly-owned subsidiary is expected to be completed on or before March 31, 2022, subject to receipt of requisite regulatory approvals and fulfilment of customary closing conditions.

The revenues and profits derived from the new subsidiary will be consolidated in the parent company, Morepen Laboratories.
Spelling out the reasons for the sale, the company said, the company is engaged in pharmaceutical business comprising the manufacture and sales of Active Pharmaceutical Ingredients (APIs), finished formulations and point-of-care (POC) medical devices. The over-the-counter drugs (OTC) business is already being carried on through its wholly-owned subsidiary, Dr. Morepen Limited. Having established itself as a preferred generic manufacturer in the international market, the company moved aggressively up the value chain in its core API business and is also finding its niche in the finished dosages space. POC Medical Devices business has also developed a strong trust and bond with customers and has gained market leadership in India. In the recent few years, the POC Medical Devices business has grown exponentially and has gained a very high market share. In house manufacturing of the key products has given further impetus to cost reduction and fuelled the growth trajectory.

Given the fast scaling up of business and mainstreaming of point-of-care business in India, the company targets a leadership position in POC business in India and for export. In light of this, the company plans to carve out the business into a separate wholly-owned subsidiary both for building teams to manage the scale of operations of large and fast-growing businesses and unique features of POC business.

Given the scale the company is looking to achieve in this point of care Medical Devices business, it also plans to bring in fresh capital that makes it imperative to have a separate subsidiary to undertake this fast-expanding POC business. The nature of said POC Medical Devices business, management, sales and marketing strategies are different than that of the typical API and Pharma business of the company. The proposed segregation will give clarity to the working teams, trade customers and other stakeholders. Post this spin-off, the company will be able to put the entire focus on its core business of active pharmaceutical ingredients (API) and formulations. The company has got two US FDA plants of API and is exporting the drugs to over 80 countries and that is the highly specialised and technical business and needs more expertise and skills in that area.

On the other hand, the medical devices business is more focused on digital and biological sciences and requires more marketing efforts to increase its reach and penetration in the Indian market. After hiving off Medical Devices Business into wholly-owned subsidiary company, separate dedicated management will work for the development of Medical Devices Business in the separate independent entity. In the second phase post hive off, the Medical Devices company would go for CE Certification of its manufacturing facilities to become the hub for PoC manufacturing in India. The new entity plans to deploy more resources on the R&D, backwards integration of core technologies like making enzymes, proteins and develop a data lab for connected devices.