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ABBOTT-PIRAMAL OUTLOOK • Vikram Dhariwal (05) • Prasoon Mishra (06) • Yash Ahuja (22) • Abhijit Dhote (36) • Arpit Verma (41) • Diwakar Singh (43) • Bhavesh Kothari (45) • Sagar Mehra (54)
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Abbott Piramal Outlook

Apr 08, 2015

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Page 1: Abbott Piramal Outlook

ABBOTT-PIRAMAL OUTLOOK

• Vikram Dhariwal (05)• Prasoon Mishra (06)• Yash Ahuja (22)• Abhijit Dhote (36)• Arpit Verma (41)• Diwakar Singh (43)• Bhavesh Kothari (45)• Sagar Mehra (54)

Page 2: Abbott Piramal Outlook

INDUSTRY ANALYSIS

• Indian Pharma Industry is the third largest in the world - $9 Billion USD.

• CAGR is estimated to be around 12-15%• By 2015, Indian Pharma Industry set to touch

US $20 billion.• The “organized” sector of India's

pharmaceutical industry consists of 250 to 300 companies, which account for 70 percent of products on the market.

Page 3: Abbott Piramal Outlook

TOP TEN COMPANIESTOP TEN COMPANIES IN THE INDIAN PHARMA INDUSTRY

CIPLA

RANBAXY

GSK(INDIA)

PIRAMAL HEALTHCARE

ZYDUS CADILA

SUN PHARMA

LUPIN LABORATORIES

ALKEM

SANOFI-AVENTIS(INDIA)

MANKIND PHARMA

Page 4: Abbott Piramal Outlook
Page 5: Abbott Piramal Outlook

WHY MNC’s ARE INTERESTED IN INDIA

• Indian Pharma sector likely to grow 11% over the years.

• Optimum regulatory situation & patent regime is getting established.

• Increased revenue growth.• India is currently the fifth largest emerging

market in the world today with ~$9 bn of sales in 2010

Page 6: Abbott Piramal Outlook

Top 10 countries expected to contribute 85% of EM Sales

COUNTRY RANK MARKET SALES (US $bn)

SHARE OF EM MARKET GROWTH

(%)

CHINA 1 17.6 25 27

MEXICO 2 17.4 11 4

BRAZIL 3 15.7 11 13

TURKEY 4 11.2 11 10

INDIA 5 9.2 8 25

RUSSIA 6 7.9 6 9

VENEZUELA 7 2.6 4 32

ARGENTINA 8 2.4 4 22

SOUTH AFRICA 9 1.5 2 12

ALGERIA 10 1.2 2 21

Page 7: Abbott Piramal Outlook

The Indian Pharma industry

INDIA AS AN EMERGING MARKET• Doubling the disposable income and the number of middle class households• Expansion of medical infrastructure • Penetration of health insurance• Rising prevalence of chronic diseases• Adoption of product patents • Aggressive market penetration driven by smaller companies

REASON FOR GROWTH PERCENT CONTRIBUTIONINCOME GROWTH 40MEDICAL INFRASTRUCTURE 20INSURANCE PENETRATION 15INCREASE IN PREVELANCE 10OTHERS 15

6-20 $ Bn (FROM 2005-15), THE 14 BILLION DOLLAR WILL BE DUE TO THE ABOVE SPLIT UP

Page 8: Abbott Piramal Outlook

CHRONIC DISEASEEG: CANCER, DIABETICS

ACUTE DISEASE – EG: COLD, FLU

BCG PHARMA INDUSTRY

GR

OW

THMARKET SHARE

Page 9: Abbott Piramal Outlook

ABBOTT HEALTHCARE PRIVATE LIMITED

Page 10: Abbott Piramal Outlook

PIRAMAL HEATHCARE LIMITED

Page 11: Abbott Piramal Outlook

INTRODUCTION TO ABBOTT-PIRAMALACQUIRER

• Abbott Healthcare Private Limited, India

SELLER

• Piramal Healthcare Limited, India

ASSETS ACQUIRED• Domestic Formulation Business (including mass market) which manufactures, markets and

sells branded pharmaceutical products in finished form.MODE OF ACQUISITION

• Business Transfer of the Formulation Business into AHPL as a going concern.

CONSIDERATION• USD 3.72 billion (approx. INR 175 billion). Upfront payment: USD 2.12 billion Future payment:

USD 400 million payable upon each of the subsequent four anniversaries of the closing commencing in 2011.

MODE OF FUNDING

• Cash on the balance sheet of AHPL.

Page 12: Abbott Piramal Outlook

WHY PIRAMAL?

• Abbott is following a Emerging market penetration strategy.

• Near saturation of the western market is bringing MNC’s to India.

• This deal would help them give an edge over their competitors.

• Added attraction: In India, individuals and not govt pay for a big portion of the healthcare costs.

Page 13: Abbott Piramal Outlook

SYNERGIES AVAILABLE TO ABBOTT

Page 14: Abbott Piramal Outlook

Abbott-Solvay-Piramal

• The Abbott-Solvay-Piramal trio would emerge as the undisputed leader in the lucrative Rs 4,350 crore gastrointestinal market with over 11% share.The trio would outperform Cadila Healthcare, Dr Reddy’s and Alkem on its way.

Vitamins & nutrients

• Abbott & Piramal together can form a combined market share of over 8%. The duo would surpass rival MNCs Novartis, Pfizer, GSK, Merck among host of other companies.

Dermatology Segment

• Piramal holds 6.5% market share in the dermatology segment and with this acquisition Abbott will become among the top 5 players solely riding on this acquisition.

Neurology Space

• Abbott-Piramal duo would make solid gains and jump straight to the second position only trailing Sun Pharma

Core Anti-infectives

• Abbott would gain significant presence riding on Piramal’s strength. In the segment, while Abbott figures nowhere in the top 10, Piramal commands a market share of 5.6% and the sixth position

Page 15: Abbott Piramal Outlook

STRUCTURE OF THE TRANSACTION

fjjjPiramal Group(Promoter Group)

Formulation Business

Abott Healthcare Pvt. Ltd.

Piramal Healthcare Ltd.

Public Shareholders

Abbott Laboratories, USA

100%

47.9%

52.1%

CASH USD 3.72bn

Business Transfer

Page 16: Abbott Piramal Outlook

Increasing Sales and Market Size

2005 2006 2007 2008 2009 2010 2011e 2012e0

500

1000

1500

2000

2500

3000

SALES(cr)

CAGR 17%

CAGR – 24%

Page 17: Abbott Piramal Outlook

Recent M&A Deals in Indian Pharma Space

Target Company AcquirerDeal Value (USD mn)

EV/SALES Mode of Acquisition

Matrix Labs Mylan 736 4.1x Acquired whole company

Ranbaxy Labs Daiichi 4600 6.4x Acquired whole company

Dabur Pharma Fresenius Kabi 273 3.7x Acquired whole company

Santha Biotec Sanofi-Aventis 784 8.7x Acquired whole company

Orchid Chemicals Hospira 400 5x Acquired Injectable business only

Piramal Healthcare Abbot 3700 8.1x Acquired domestic formulation

business

Page 18: Abbott Piramal Outlook

Is The Deal Expensive ??

Particulars Amount

Up Front Payment (US $mn) 2120NPV of Future Payments 400mn US $ for 4 years from 2011 (Discounted at 10%) 1268

PV Total Reciepts (US $ mn) 3388

PV Total Payments (cr) 15856

Additional Payment To PEL(Rs) 350

EV/SALES Valuation 8.1

Current valuation of the deal is at 6.6x and 5.5x on basis of FY11e and FY12E sales.

We see the valuation of Piramal’s DFB at 7x on basis of FY10 sales.

Page 19: Abbott Piramal Outlook

ADVANCING ABBOTT (Growth Strategy)

Page 20: Abbott Piramal Outlook