The acquisition of Yash Pharma Laboratories Ltd's premium brand in the cough and cold category Lemolate at Rs.10.95 crore by Morepen Laboratories Ltd has been termed a good deal by some industry sources.

Lemolate, a combination of phenylephrine hydrochloride, chlorpheniramine maleate, paracetamol and caffeine, is said to be the fifth largest brand in the cough and cold category and has registered a turnover of Rs 9.60 crore in the year ending March 2002.

Lemolate is the third acquisition by the Delhi-based company after Burnol and Lifespring.

Industry sources believe that going by the standard one and half times sales multiple, a factor that is taken into account for determining the sales or purchase price, Morepen has gained a lot in the deal, clearly indicating that Yash has lost money in the bargain.

But a merger and acquisition specialist said that the brand was stagnant for the last two years due to which the seller may not have got an opportunity to demand more. The price of the brand is reasonable for both parties, he said, adding the one and a half times sales multiple factor can be applied to a brand only if it is growing.

According to head of a brokerage, "Morepen will be able to unlock higher value from the brand thanks to their superior marketing. As for Yash, as the brand is just among the top five and not one with an immediate recall, Yash might have found it difficult to milk the brand further and sold it off. Even if Yash wanted a higher price there wouldn't have been many offers kind to it. The deal is definitely good for Morepen."

Another analyst says the deal has come in favour of Morepen and the company is clearly building up an over the counter business strategy.

However, a retail-cum-wholesale source told www.pharmabiz.com that Lemolate was not at all growing. The manufacturer made a good start and had reached among the top five in the cough and cold segment but did not persist with doctor detailing. This stopped the brand's growth, he said.

According to him, Yash Pharma has been able to make money out of the stagnant brand's sale and become the winner in the deal.

According to ORG-MARG, Lemolate has shown a growth of 3.34 per cent and recorded a sales of Rs 8.2 crore in March 2002 (moving annual turnover).

According to another market researcher, Lemolate had a sale of Rs 6.32 crore (excluding OTC sales) in the year ending March 2002 and a growth of minus 3.39 per cent. The same product registered a sale of Rs 6.72 crore in the year ending April 2002 and a growth of 6.91 per cent.

Another merger and acquisition specialist who spoke to this website said that the deal was a stupid one for Morepen to do, especially since the product value was too less. "Moreover the Rs 800 crore cough and cold segment is overcrowded with 112 brands. Lemolate has hardly any recall among the public. The product turnover may also be less than what has been claimed," he added.

A senior official with a multinational company expressed surprise at the way Morepen was going around buying brands. "Where do they get the money to do all this?" he asked.