m_a_indian pharma_2

8/10/2019 m_a_indian pharma_2

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INDIAN

PHARMACEUTICAL

INDUSTRY


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Introduction

Pharmaceutical industry in India is ranked 3rd involume terms and 14th in value terms globally.

It is highly fragmented with more than 20,000registered units.

It meets around 70% of the countrys demand forbulk drugs, drug intermediates, pharmaceuticalformulations (patented & generic drugs), chemicals,

tablets, capsules, orals and injectables. The Indian pharmaceutical industry traditionally

relied on reverseengineeringi.e. product copying,

through which vast profits were made.


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Contd.

The pharmaceutical sector consists primarily ofthree types of players: bulk drugs producers, pureformulators, or integrated firms (which produce bothbulk drugs and market formulations).

Pharmaceutical companies deals in:

Generic Drugs (produced & distributed without

patent) Brand Medications (produced & sold by the co.

that holds patent for the drug), and

Medical Devices


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Growth

Indian pharmaceutical industry is estimated to be

worth US$4.5 billion, growing at about 8 to 9 per

cent annually. It is predicted that the Indian pharmaceuticals

market will grow to US$55 billion in 2020; and if

aggressive growth strategies are implemented, it hasfurther potential to reach US$70 billion by 2020.


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Ranbaxy Labs ,7,686.59

Cipla , 6,977.50

Dr.Reddys

Labs ,6,686.3

0

Lupin ,5,364.37

Aurobindo Pharma, 4,284.63

Cadila Health ,3,152.20

Jubilant Life ,2,641.07

Wockhardt ,2,560.16

IPCA Labs, 2,352.59

GlaxoSmithKline, 2,345.88

Top Pharmaceutical Companies in India by Net

Sales (2011-12)

Net Sales in Rs. cr


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Major Pharmaceutical

Regulatory Bodies in India

Department of Chemicals & Petrochemicals:-

Responsible for the policy, planning, development,and regulation of the chemical, petrochemical &

pharmaceutical industries in India.

Central Drugs Standard and Control Organization:-Control the quality of drugs imported into the

country, approval of new drugs proposed to be

imported or manufactured in the country etc.


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Contd.

National Pharmaceutical Pricing Authority:-

Established to fix/revise the prices of controlled bulk

drugs & formulations and to enforce prices &availability of the medicines in the country.


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FDI Policy

FDI, up to 100 per cent, under the automatic route,

is allowed for green field investments in the

pharmaceuticals sector.

FDI, up to 100 per cent, is permitted for brown field

investment (i.e. investments in existing companies),

in the pharmaceutical sector, under the government

approval route.


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Pharma Pricing Policy

Under this policy, 348 essential medicines will come

under the Govt. price control.

The Group of Ministers finalised market basedweighted average prices for all the drugs, which

have a market share of more than 1%.

The weighted average price of products having over1% market share would be taken as the maximum

retail price.


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Mergers & Acquisitions in

Pharmaceutical Sector


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Merger and Acquisition

Merger refers to a combination of two or morecompanies into a single company whereby the assets

and liabilities of one are vested in the other, with the

effect that the former enterprise loses its identity.

Acquisition means an act of acquiring effective

control by one company over assets or management

of another company without any combination of

companies. In this, two or more companies may

remain independent and enjoy separate legal entities,

but there may be a change in control of the

companies.


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Mergers & Acquisitions in the pharmaceuticalsectors have grown considerably in the past few

years.

Large pharmaceutical companies enter into

transactions so as to maintain their market share and

to reduce competition with other new generation

drugs.

Now, it is important to pay particular attention to

whether such mergers are creating barriers to

generic entry or causing potential harm to

innovation.


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M&As Deals (Outbound)Company (Acquirer)

Company (Target)

For Amount

Biocon

Axicorp (German)

$30 million

Dr. Reddys Labs Trigenesis Therapeutics (USA) $11million

Wockhardt Esparma (German) $11million

Wockhardt

C. P. Pharmaceuticals (UK)

$17.9 million

Wockhardt Negma Laboratories (France) $265 million

Wockhardt Morton Grove Pharma (USA) $38 million

Zydus Cadila Alpharma (France) Euros 5.5 million

Ranbaxy RPG Aventis (France) $70 million

Nicholas Piramal Biosyntech (Canada) $4.85 million

Sun Pharma Taro (Israel) $500 million

Cadila Healthcare

Quimica e Farmaceutica Nikkho

$26 million


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M&As Deals (Inbound)

Company (Acquirer) Company (Target) For Amount

Daiichi Sankyo (Japan) Ranbaxy (India) $4.2 billion

Abbott (USA) Piramal (India) $3.72 billion

Sanofi Aventis Shantha (India) $783 million

Mylan (USA) Matrix (India) $736 million

Reckitt Benckiser Paras (India) $724 million

Hospira Orchid (India) $400 million

Fresenius Kabi (German) Dabur Pharma (India) $219 million

Abbott (USA) Wockhardt (India) $22.5 million


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Reasons for M&As

Absence of proper R&D facilities

Increase in market share Generic competition

Growing Indian population

Increase in chronic diseases

Gradual expiry of patents

Product/Brand extension etc.


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Daiichi-Ranbaxy Deal

Largest in the India

8th in largest in the global

generic pharmaceuticalsServing in over 125 Countries

Ground operations in 49

countries & Manufacturing in 11

countries

Strong R&D Base

2ndlargest in Japan

22

nd

Largest in the worldOperations in 50 countries

Producer of high quality

drugs

15th Largest drug maker in the

world

Market Capitalization$30 Billion

Low cost production


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The Deal

Daiichi-Sankyo acquired 34.8% stake in Ranbaxy on11thJune, 2008.

It made an open offer to the Ranbaxy shareholders

for another 20%. Picked up another 9.12% through preferential

allotment.

It was an all cash transaction.

Size of the deal: approx. US$ 4.6 Billion.

As per the deal, total value of Ranbaxy was US$ 8.5

billion.


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Strategic Objectives Behind The Deal

Presence in emerging markets for Daiichi-Sankyo. Entry into non-proprietary drugs for Daiichi-Sankyo

(Product Extension). To develop new drugs to fill

the gaps and take advantage of Ranbaxys strongareas.

The acquisition of Ranbaxy by Daiichi represents a

major entry for the Japanese firm into the high

growth business areas of generic drug. The

acquisition shows that global pharma companies are

making efforts to cope up with strong generic drug

makers.


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Conclusion

Consolidation in Indian pharmaceutical industry

could lead to increase in prices of drugs, reduce

availability of drugs in domestic market etc. Due to such effects of increasing consolidation, it

would be the consumer who would suffer the most.

Therefore, the law should specifically empower and

require the antitrust enforcement agencies to review

& respond to concerns arising from combinations in

the pharmaceutical industry.


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It is also important to assess the impact ofcombinations on innovations as M&As in

innovations markets may pose a threat for

subsequent entry of new products by stifling

competition at the R&D and product development

stage.


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