Domestic drugmakers eyeing inorganic growth will increasingly look at buying small businesses in niche domains rather than chase multi-million-dollar companies, going by the trend so far.

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The past few weeks have seen two “moderate” and “niche” buys by Sun Pharma – of dermatology firm Dusa and the generics business of URL Pharma.

Both these deals are said to be in the $150-250 million (Rs800-1,300 crore) bracket.Compare this with the $450 million the company coughed up five years ago for buying a stake in Taro and a further $600 million to acquire the remaining shares in the Israeli firm.Dr Reddys Laboratories (DRL) also made a small and niche buy in October by acquiring Dutch injectables firm OctoPlus NV for €27.39 million (around Rs200 crore).

Six years ago, the Hyderabad-based company had paid €480 million for buying German entity Betapharm.

Among others, Mumbai-based Lupin has also said that it will look to buy brands and technology in markets like Latin America.

Experts say these small and niche deals indicate drugmakers are more at ease with acquiring relatively small firms in niche domains like dermatology, injectables, oral contraceptives and some segments in biopharma. Buys in areas like cardiology and diabetes appear to be a no-no now.

“When it comes to buys, domestic drugmakers will be looking at small firms that are in niche segments having very little competition,” said Jacob Mathew, founder of investment banking firm MAPE Advisory Group.

According to Bhavin Shah, analyst, Dolat Capital, drugmakers will look for buys that are not in the plain vanilla space. “Something that can add value to the company in terms of opening up a new therapeutic segment that company is not currently present in.”An analyst with a domestic brokerage concurred. “Niche segments like oral contraceptives, injectables, dermatology require specialised expertise and experience.

Hence, such areas work well through acquisitions.”

What also swings it in favour of such deals is that bigger acquisitions in the past have not gone down very well.

“Specially in the pharma space, integrating a small company works easier than a very big one. In this sector, the big buys have been extremely challenging, both Taro and Betapharm,” said the domestic brokerage analyst.