The buyout of Ranbaxy by Daiichi Sankyo in June may have given reason to suppose more multinationals would gobble up Indian pharma companies, and soon.
The buyout of Ranbaxy by Daiichi Sankyo in June may have given reason to suppose more multinationals would gobble up Indian pharma companies, and soon, but realisation is slowly dawning on local players that acquisitions aren’t quite what they
have in mind now.
Instead, say industry watchers, MNCs are keen to enhance their presence in India through sourcing strategies, licensing agreements and research collaborations.
Indeed, going by research analyst Bhavin Shah of derivatives firm Dolat Capital Market, the molecules being developed by domestic companies seem to interest MNCs more than the companies themselves.
The series of collaborations, which have taken shape between Indian and foreign companies of late, indicate as much.
First, Pfizer Inc, the world’s largest drug maker, struck a licensing agreement with Aurobindo Pharma to sell over 70 generics manufactured by the Hyderabad-based company in the US and the European Union.
Next, Noida-based Jubilant Organosys entered into a three-way drug discovery partnership with Finland-based Orion, through which the Finnish company will have the option of utilising resources from Jubilant based on the requirements of its drug discovery projects.
Zydus Cadila was the latest to enter into an agreement with a foreign company by way of its deal with US-based Eli Lilly for discovery and development of cardiovascular drugs, for which Zydus will receive milestone payments of up to $300 million.
Sanjay Singh, associate director of KPMG, says there is a pressing need for MNCs to penetrate deeper into India, but not necessarily through buyouts. “MNCs will not pay any random amount to acquire Indian companies. They will first strengthen their presence through collaborations.”
The proposed deal by France’s Sanofi Aventis to buy a majority stake in Piramal Healthcare supposedly fell flat due to differences over valuation.
“If outsourcing deals fit the needs of MNCs, they won’t have any purpose left in acquiring a company. Buyouts should add sufficient value to the buyer and should have a strategic fit,” says Sujay Shetty, associate director of PricewaterhouseCoopers.
Big Pharma is bent upon pushing itself into the heart of India, a huge market worth over Rs 34,000 crore, where domestic companies clearly have an edge with a 75% share.
With the new-drug pipelines drying up and a slew of patent expiries staring in the eye, it makes sense for global players to stabilise their presence in India, which is largely a generic market.
According to data from securities house First Global, drugs worth $44 billion will go off patent in 2010, including blockbusters (those grossing over $1 billion in sales annually) like Lipitor (cholesterol) and Cozaar (blood pressure), etc.
“Thus, global giants have to aim at increasing their clout in the generic market of India,” says an official from a Hyderabad-based pharma major.
Apart from collaborations and partnerships, the multinationals would be keen to get their global products portfolio quickly to India.
“AstraZeneca launching its blockbuster cholesterol drug Crestor in India is a recent example. They will try and grow organically by introducing more and more of their global basket here,” says Singh.
Among others, GlaxoSmithKline is also bent upon quickly introducing its global products in India, albeit at lower costs.
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