Morepen Laboratories Ltd announced that the board has approved transfer of the point-of-care medical devices business into a wholly-owned subsidiary on a slump sale basis, which is expected to be completed on or before 31st March 2022, subject to receipt of requisite regulatory approvals and fulfillment of customary closing conditions.

The transfer of the medical devices business of the company on a slump sale basis, as provided under Section 2(42C) of Income Tax Act, 1961, 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 process of incorporation.

The company is engaged in pharmaceutical business comprising of the manufacture and sales of active pharmaceutical ingredients (APIs), finished formulations and point-of-care (POC) medical devices. 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, POC medical devices business has grown exponentially and has gained very high market share, thanks to the trust imposed by the customers and trade on the company’s product quality and after-sale service. 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.

The company plans to carve out the business into a separate wholly owned subsidiary both for building teams to manage scale of operations of large and fast-growing business 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 the clarity to the working teams, trade customers and other stakeholders.

Post this spin off, the company will be able to put entire focus on its core business of active pharmaceutical ingredients and formulations. The company has got two US FDA plants of API and is exporting the drugs to over 80 countries and that is highly specialised and technical business and needs more expertise and skills in that area.