Inside the exit: Signet makes approximately 3x in RK Pharma exit

Signet Healthcare Partners, a New York-based PE firm, exited its stake in drugmaker RK Pharma to realize a return of almost three times its investment, founding partner and managing director James Gale said.

In an interview after the exit, Gale said the demand for generic drugs helped the company to grow, while also heaping praise on the management team led by founder and executive chairman of RK Pharma, Ravishanker Kovi.

RK Pharma, based in Pearl River, New York, specializes in the development, manufacturing and sale of generic pharmaceutical products with a particular focus on complex injectables. The company has subsidiaries in India, too.

“As a vertically integrated pharmaceutical company, RK Pharma manufactured active pharmaceutical ingredients, had an effective research arm for developing both chemicals and drugs and handled the drug manufacturing process,” Gale said. “Additionally, the company had a commercial arm dedicated to selling the drugs.”

He said under the guidance of Kovi, “we established clear guidelines to ensure measured and strategic growth, rather than relying on random chance.”

RK Pharma is now under the control of Hong-Kong based firm PAG, which invested $200 million.

Generic drugs play a pivotal role in society as they offer cost-effective alternatives to expensive medications that have lost their patent protection, Gale said. “By reducing the financial burden on patients, generic drugs enhance access to vital medicines. Notably, more than 85 percent of all prescription drugs used in the United States are generic.”

The generic drugs that RK Pharma focuses on cover anemia, ophthalmology, oncology, inflammatory diseases and more.

Signet Health Partners invested in RK Pharma in August 2019. During that hold period, “we completed an acquisition of a portfolio of generic drugs to begin our own commercial operation (Archis) and completed the acquisition of a starting materials business (Aktinos),” said Gale.

Over the last decade, Signet completed more than a dozen investments in contract development and manufacturing organizations, or CDMOs, over the last decade.

What made RK Pharma attractive to the firm is that, as a vertically integrated company, it is involved in various niches, such as active pharmaceutical ingredients (APIs), CDMOs/CROs and the marketing of approved products, which matched Signet Health Partners’ investment criteria, said Gale.

“Our initial forecast projected a revenue and EBITDA growth of 25 percent per year, and we are pleased to note that they exceeded these expectations throughout our investment tenure,” he said.